Common Ownership and Competition: Facts, Misconceptions, and What to Do About It - Background paper for OECD Hearing on Common Ownership by Institutional Investors and Its Impact on Competition

DAF/COMP/WD(2017)93

16 Pages Posted: 25 May 2018

See all articles by Martin C. Schmalz

Martin C. Schmalz

CEPR; University of Oxford - Finance; CESifo; European Corporate Governance Institute (ECGI)

Date Written: December 6, 2017

Abstract

Competition requires that firms have incentives to compete. Common ownership reduces these incentives. There is no known reason or mechanism by which firms are supposed to compete in the absence of incentives to do so. All arguments in the defense of the asset management industry amount to a distraction from this key point, the absence of evidence to the contrary, as well as from the existing empirical evidence that current levels of common ownership are very likely to reduce competition. This note exposes the alternative talking points the industry and its defendants have brought forward, and contrasts them with empirical facts.

Keywords: Competition, Ownership, Diversification, Pricing, Antitrust, Governance, Product Market

JEL Classification: L41, L10, G34

Suggested Citation

Schmalz, Martin C. and Schmalz, Martin C., Common Ownership and Competition: Facts, Misconceptions, and What to Do About It - Background paper for OECD Hearing on Common Ownership by Institutional Investors and Its Impact on Competition (December 6, 2017). DAF/COMP/WD(2017)93 , Available at SSRN: https://ssrn.com/abstract=3176696 or http://dx.doi.org/10.2139/ssrn.3176696

Martin C. Schmalz (Contact Author)

CEPR ( email )

London
United Kingdom

University of Oxford - Finance ( email )

United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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