Conceptual Breakthroughs on Common Ownership and Competition: A Framework For Evaluating Policy

34 Pages Posted: 24 Mar 2022 Last revised: 4 Apr 2022

See all articles by Martin C. Schmalz

Martin C. Schmalz

CEPR; University of Oxford - Finance; CESifo; European Corporate Governance Institute (ECGI)

Date Written: April 4, 2022


This paper provides a framework for evaluating policy proposals aimed at invigorating competition and improving corporate governance amid a high and increasing level of common ownership of product market competitors. In particular, I propose that any effective proposal must have the effect of separating the level at which diversification is achieved from the level at which corporate governance is exercised. Several extant proposals are likely to have that effect. I also discuss conceptual breakthroughs on several issues that regulators and industry stakeholders considered necessary to address before changing policy, including (i) the joint recognition of vertical and horizontal common ownership links, (ii) agency problems, (iii) informational and organizational frictions, (iv) methods to infer causality, (v) a better understanding of how investors' portfolio choice depends on firms’ strategic interactions, and (vi) improving data quality.

Keywords: ownership, control, industry concentration, antitrust, competition, managerial incentives, corporate governance

JEL Classification: D21, D22, G10, G30, G32, G34, J41, K21, L10, L16, L21, L40, L41, L42

Suggested Citation

Schmalz, Martin C. and Schmalz, Martin C., Conceptual Breakthroughs on Common Ownership and Competition: A Framework For Evaluating Policy (April 4, 2022). Available at SSRN: or

Martin C. Schmalz (Contact Author)

CEPR ( email )

United Kingdom

University of Oxford - Finance ( email )

United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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