Common Ownership, Institutional Investors, and Welfare
30 Pages Posted: 2 Jan 2019 Last revised: 5 Dec 2019
Date Written: December 3, 2019
This study evaluates the effects of institutional investors' common ownership of firms competing in the same market. Overall, common ownership has two opposing effects: (a) it serves as a device for weakening market competition, and (b) it induces diversification, thereby reducing portfolio risk. We conduct a detailed welfare analysis within which the competition-softening effects of an increased degree of common ownership is weighted against the associated diversification benefits.
Keywords: Common ownership, institutional investors, market power, portfolio diversification.
JEL Classification: G11, G23, G28, L13, L41
Suggested Citation: Suggested Citation