Common Ownership and Industry Profitability: A Crossindustry View

73 Pages Posted: 17 Aug 2019

See all articles by Haifeng Wang

Haifeng Wang

The Vanguard Group, Inc.

Jan-Carl Plagge

The Vanguard Group, Inc.

James Rowley

The Vanguard Group, Inc.

Roger A Aliaga-Diaz

The Vanguard Group, Inc.

Date Written: August 1, 2019

Abstract

Our paper contributes to the common ownership debate by empirically assessing the link between common ownership and profitability as a proxy for market competition. Rather than focusing on single industries, as most related studies do, we assess the common ownership hypothesis in the aggregate, using a panel of about 3,000 U.S. firms in about 200 industries over a 21-year period. We hypothesize that if anticompetitive effects due to common ownership were present within individual industries, then the same anticompetitive outcomes should be observed when the data is expanded to cover all industries and over an extended period of time. We explore the statistical relationship between our chosen measure of common ownership and profitability across multiple model specifications, such as (1) two alternative econometric models, (2) different sets of control variables, (3) different time periods, and (4) four variations of MHHIΔ. We do not find conclusive evidence that common ownership is associated with industry-level profit margins.

Keywords: Common ownership, MHHI, competition, industry profitability

JEL Classification: L10, L21, L41

Suggested Citation

Wang, Haifeng and Plagge, Jan-Carl and Rowley, James and Aliaga-Diaz, Roger A, Common Ownership and Industry Profitability: A Crossindustry View (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3437129 or http://dx.doi.org/10.2139/ssrn.3437129

Haifeng Wang (Contact Author)

The Vanguard Group, Inc. ( email )

100 Vanguard Blvd
Malvern, PA 19355
United States

Jan-Carl Plagge

The Vanguard Group, Inc. ( email )

100 Vanguard Blvd
Malvern, PA 19355
United States

James Rowley

The Vanguard Group, Inc. ( email )

100 Vanguard Blvd
Malvern, PA 19355
United States

Roger A Aliaga-Diaz

The Vanguard Group, Inc. ( email )

100 Vanguard Blvd
Malvern, PA 19355
United States

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