Ownership and Competition

67 Pages Posted: 29 Jan 2021 Last revised: 9 Dec 2021

See all articles by Alessio Piccolo

Alessio Piccolo

Indiana University - Kelley School of Business

Jan Schneemeier

Indiana University - Kelley School of Business

Date Written: November 1, 2020

Abstract

We develop a framework to explore how financial markets shape the ownership structure of industry rivals. A fraction of identical investors acquires diversified portfolios with positions in all firms (common owners), while the remaining investors hold undiversified portfolios. When investors influence competition, the return of diversified portfolios and the risk of undiversified portfolios may increase with the industry's degree of common ownership (CO). This crowding out of undiversified investors exacerbates the anti-competitive effects of CO and generates non-fundamental volatility. Our results are robust to alternative mechanisms to influence competition and different trading motives, and offer novel empirical implications.

Keywords: common ownership, competition, corporate governance

JEL Classification: D82, D83, G34

Suggested Citation

Piccolo, Alessio and Schneemeier, Jan, Ownership and Competition (November 1, 2020). Available at SSRN: https://ssrn.com/abstract=3733795 or http://dx.doi.org/10.2139/ssrn.3733795

Alessio Piccolo

Indiana University - Kelley School of Business ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
+18123914734 (Phone)

HOME PAGE: http://https://kelley.iu.edu/faculty-research/faculty-directory/profile.cshtml?id=APICCOL

Jan Schneemeier (Contact Author)

Indiana University - Kelley School of Business ( email )

1275 E 10th St
Bloomington, IN 47405
United States

HOME PAGE: http://www.jan-schneemeier.com

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