Does Common Ownership Really Increase Firm Coordination?
48 Pages Posted: 4 Mar 2019
Date Written: February 17, 2019
A growing body of evidence concludes that common ownership has caused cooperation among firms to increase and competition to decrease. We take a closer look at four different approaches the literature has used to identify these effects. We find that the effects the literature has attributed to common ownership are caused by other factors, such as differential responses of firms (or industries) to the financial crisis. We propose a modification to one of the previously used instruments, which is less sensitive to these issues. Using this to re-evaluate the link between common ownership and multiple firm outcomes, we find little robust evidence that common ownership affects firm behavior.
Keywords: common ownership, institutional investors, corporate governance
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