Common Ownership and the (Non-)Transparency of Institutional Shareholdings: An EU-US Comparison
Journal of Law, Finance, and Accounting (Forthcoming)
47 Pages Posted: 25 Jul 2022 Last revised: 17 Sep 2023
Date Written: July 25, 2022
The available evidence suggests that common ownership – the phenomenon that publicly traded stock is increasingly held by the same diversified investors, especially index fund managers – is much more pervasive in the US than in Europe. However, the ownership data situation in these jurisdictions is vastly different. In the US, institutional investors have to disclose periodically all their equity holdings on Form 13F, while no such disclosure exists in most other jurisdictions, including the EU and its Member States. The question, therefore, arises whether observed differences reflect actual differences or simple measurement error. In this paper, I develop a framework to quantify the extent to which US ownership statistics hinge on 13F filings. While 13F data greatly improve US coverage of institutional ownership in general, I show that the relevance of this extra coverage varies across different measures of common ownership. Most notably, firm-pairwise profit weights are hardly affected and tend to even decrease at the margin. Qualitatively, the observation that there is much more common ownership in the US than in Europe holds even if ownership information exclusively available via 13F filings is disregarded.
Keywords: common ownership, profit weights, ownership disclosure, 13F filings, index funds, passive investors, institutional investors, Big Three
JEL Classification: G23, G34, G38, K22, L10, L41
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