69 Pages Posted: 31 May 2015 Last revised: 26 Feb 2017
Date Written: Feb 23, 2017
This paper presents findings indicating a structural shift in US product markets that has weakened competition. More than 75% of US industries have experienced an increase in concentration levels over the last two decades. Firms in industries with the largest increases in product market concentration have enjoyed higher profit margins, positive abnormal stock returns, and more profitable M&A deals, which suggests that market power is becoming an important source of value. In real terms, the average publicly-traded firm is three times larger today than it was twenty years ago. We propose that lax enforcement of antitrust regulations and increasing technological barriers to entry appear to be important factors behind this trend, resulting in weakened competition.
Keywords: industry concentration; HHI; product markets; profit margins; publicly-traded firms; M&A; antitrust
JEL Classification: G18, G30, G34, G48, L40, L10
Suggested Citation: Suggested Citation
Grullon, Gustavo and Larkin, Yelena and Michaely, Roni, Are US Industries Becoming More Concentrated? (Feb 23, 2017). Available at SSRN: https://ssrn.com/abstract=2612047 or http://dx.doi.org/10.2139/ssrn.2612047