Common Ownership Types and Their Effects on Innovation and Competition

61 Pages Posted: 31 Jul 2018 Last revised: 24 Apr 2019

See all articles by Paul Borochin

Paul Borochin

University of Miami - Department of Finance

Jie Yang

Board of Governors of the Federal Reserve System

Rongrong Zhang

Georgia Southern University

Date Written: April 22, 2019

Abstract

In corporate innovation, the type of institutional ownership matters. Using exogenous shocks from mergers of financial institutions, we identify two countervailing effects of common ownership on corporate innovation. Higher common ownership by focused, long-term dedicated institutional investors promotes innovation output and impact, as measured by number of patents and non-self citations. Meanwhile, higher common ownership by diversified, short-term transient investors discourages these. Moreover, the effects of common ownership by diversified, long-term quasi-indexing institutions on innovation vary with industry competitiveness. Evidence suggests that common ownership affects innovation through the channels of firm valuation and corporate governance. These results contribute to an ongoing debate on the effects of common institutional ownership on competition.

Keywords: Institutional investor type, common ownership, innovation, patents, competition

JEL Classification: G30, G32

Suggested Citation

Borochin, Paul and Yang, Jie and Zhang, Rongrong, Common Ownership Types and Their Effects on Innovation and Competition (April 22, 2019). Available at SSRN: https://ssrn.com/abstract=3204767 or http://dx.doi.org/10.2139/ssrn.3204767

Paul Borochin (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Jie Yang

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Rongrong Zhang

Georgia Southern University ( email )

statesboro, GA 30460
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
300
Abstract Views
1,574
rank
106,288
PlumX Metrics