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Barriers To Competition Through Common Ownership By Institutional Investors
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Book Synopsis Barriers to Competition Through Common Ownership by Institutional Investors by :
Download or read book Barriers to Competition Through Common Ownership by Institutional Investors written by and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, the phenomenon of common ownership by institutional investors has sparked considerable debate about its impact on competition and companies' corporate governance. The original full study analyses some specific features of common ownership by institutional investors in the European banking sector, at the intersection between competition policy, financial sector regulation and corporate governance rules. This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON).
Book Synopsis Barriers to Competition Through Joint Ownership by Institutional Investors by :
Download or read book Barriers to Competition Through Joint Ownership by Institutional Investors written by and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, the phenomenon of common ownership by institutional investors has sparked considerable debate among scholars about its impact on competition and companies' corporate governance. This study analyses some specific features of common ownership by institutional investors in the European banking sector. It also examines closely the tension between competition policy and corporate governance tools aimed at enhancing shareholder engagement. This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON).
Book Synopsis Common Ownership, Institutional Investors, and Antitrust by : Menesh S. Patel
Download or read book Common Ownership, Institutional Investors, and Antitrust written by Menesh S. Patel and published by . This book was released on 2019 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent empirical studies demonstrate the significant extent to which a small number of well-known institutional investors have taken on large ownership interests in the majority of large U.S. public companies, including large ownership interests in horizontal competitors. The response to these studies has been dramatic, with calls for significant overhauls of antitrust policy and institutional shareholding due to common ownership's potential anticompetitive effects. Yet, this article argues, it is important to first appreciate a number of consequential complexities before any such changes occur. The article shows that while common ownership can harm competition as a theoretical matter, whether and the extent to which common ownership will actually generate competitive harm in a given market depends on numerous factors, such as the nature and extent of common ownership in the relevant market, the structure of the market, shareholder incentives, and managerial objectives. For that reason, the mere fact that institutional investors' significant equity holdings generate high levels of common ownership by itself is insufficient to conclude that this common ownership results in substantial competitive harm in a given market. The article's second contribution is a set of modest, but important, policy proposals that flow directly from the paper's core finding that there is no unequivocal answer to whether common ownership in a particular market will generate substantial competitive harm. Most important, rather than restrictions on common ownership or widespread antitrust investigation, or safe harbors or presumptions of legality, common ownership should continue to be evaluated on a case-by-case basis.
Book Synopsis Common Ownership and Competition by : Martin C. Schmalz
Download or read book Common Ownership and Competition written by Martin C. Schmalz and published by . This book was released on 2018 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Competition requires that firms have incentives to compete. Common ownership reduces these incentives. There is no known reason or mechanism by which firms are supposed to compete in the absence of incentives to do so. All arguments in the defense of the asset management industry amount to a distraction from this key point, the absence of evidence to the contrary, as well as from the existing empirical evidence that current levels of common ownership are very likely to reduce competition. This note exposes the alternative talking points the industry and its defendants have brought forward, and contrasts them with empirical facts.
Book Synopsis The Competitive Effects of Common Ownership by : Daniel P. O'Brien
Download or read book The Competitive Effects of Common Ownership written by Daniel P. O'Brien and published by . This book was released on 2017 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent empirical research purports to show that common ownership by institutional investors harms competition even when all financial holdings are minority interests. This research has received a great deal of attention, leading to both calls for and actual changes in antitrust policy. This paper examines the research on this subject to date and finds that its conclusions regarding the effects of minority shareholdings on competition are not well established. Without prejudging what more rigorous empirical work might show, we conclude that researchers and policy authorities are getting well ahead of themselves in drawing policy conclusions from the research to date. The theory of partial ownership does not yield a specific relationship between price and the MHHI. In addition, the key explanatory variable in the emerging research - the MHHI - is an endogenous measure of concentration that depends on both common ownership and market shares. Factors other than common ownership affect both price and the MHHI, so the relationship between price and the MHHI need not reflect the relationship between price and common ownership. Thus, regressions of price on the MHHI are likely to show a relationship even if common ownership has no actual causal effect on price. The instrumental variable approaches employed in this literature are not sufficient to remedy this issue. We explain these points with reference to the economic theory of partial ownership and suggest avenues for further research.
Book Synopsis Common Ownership, Institutional Investors, and Welfare by : Oz Shy
Download or read book Common Ownership, Institutional Investors, and Welfare written by Oz Shy and published by . This book was released on 2019 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study evaluates the effects of institutional investors' common ownership of firms competing in the same market. Overall, common ownership has two opposing effects: (a) it serves as a device for weakening market competition, and (b) it induces diversification, thereby reducing portfolio risk. We conduct a detailed welfare analysis within which the competition-softening effects of an increased degree of common ownership is weighted against the associated diversification benefits.
Book Synopsis Why Common Ownership Creates Antitrust Risks by : José Azar
Download or read book Why Common Ownership Creates Antitrust Risks written by José Azar and published by . This book was released on 2017 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: The share of stocks beneficially owned by institutional investors has increased substantially over the last three decades. Together with a high and increasing level of concentration in the asset management industry, this trend implies that a small number of institutional investors now constitute the largest shareholders of most publicly traded firms in the U.S. and in other developed economies. When the same set of investors owns most firms, they are bound to own several firms in the same industry. Such overlapping ownership interests among competitors, or “common ownership,” may imply a reduction in firms' incentives to compete, compared to a situation in which competitors are controlled by separate sets of investors, and may thus create antitrust risks. Recent empirical research shows evidence for such anti-competitive effects of common ownership. These findings have since ignited a debate on the antitrust risk posed by institutional investors, its legal implications and potential solutions. This article first illustrates the extent of present-day common ownership and discusses the economic logic of why common ownership leads to reduced incentives to compete and may cause anti-competitive outcomes. We then review some of the empirical evidence to date, discuss critiques of the same and explain the conceptual problems inherent with all potential policy solutions. The legal debate around these findings is discussed by a fast-growing literature, including contributions by other authors in this issue.
Book Synopsis Mere Common Ownership and the Antitrust Laws by : Thomas A. Lambert
Download or read book Mere Common Ownership and the Antitrust Laws written by Thomas A. Lambert and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Common ownership (also called horizontal shareholding) refers to a stock investor's owner-ship of minority stakes in multiple competing firms. Recent empirical studies have purported to show that institutional investors' common ownership reduces competition among commonly owned competitors. This Article considers the legality of “mere” common ownership--horizontal shareholding that is not accompanied by any sort of illicit agreement (e.g., a hub-and-spoke conspiracy) or the holding of control-conferring shares--under the U.S. antitrust laws. Prominent antitrust scholars and the leading treatise have concluded that mere common ownership that has the incidental effect of lessening market competition may violate both Clayton Act Section 7 and Sherman Act Section 1. This Article demonstrates otherwise. Competition-lessening instances of mere common ownership do not violate Section 7 because they fall within the provision's “solely for investment” exemption, which the scholars calling for condemnation have misinterpreted. Mere common ownership does not run afoul of Section 1 because it lacks the sort of agreement (contract, combination, or conspiracy) required for liability under that provision. From a social welfare standpoint, these legal outcomes are desirable. Condemning mere common ownership under the antitrust laws would likely entail significant marginal costs, while the marginal benefits such condemnation would secure are speculative. Accordingly, courts and enforcers should not, on the current empirical record, stretch the antitrust laws to condemn mere common ownership.
Book Synopsis Common Ownership, Competition, and Corporate Governance by : Vincenzo Denicolo
Download or read book Common Ownership, Competition, and Corporate Governance written by Vincenzo Denicolo and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a theoretical framework for determining the ownership stakes held by financial investors in companies competing in the same product market, or, in other words, the level of common ownership. In our model, the primary motivation for these investors is the anticipation of capital gains resulting from the impact of common ownership on product market competition, which leads to increased profitability for the firms involved. On the other hand, common ownership undermines effective corporate governance by reducing monitoring, increasing extraction of private benefits by the manager, and inhibiting investments that contribute to firm value. These negative effects on corporate governance act as limiting factors, ultimately determining the equilibrium level of common ownership.
Book Synopsis The Great Reversal by : Thomas Philippon
Download or read book The Great Reversal written by Thomas Philippon and published by Belknap Press. This book was released on 2019 with total page 361 pages. Available in PDF, EPUB and Kindle. Book excerpt: American markets, once a model for the world, are giving up on competition. Thomas Philippon blames the unchecked efforts of corporate lobbyists. Instead of earning profits by investing and innovating, powerful firms use political pressure to secure their advantages. The result is less efficient markets, leading to higher prices and lower wages.
Book Synopsis A Proposal to Limit the Anti-Competitive Power of Institutional Investors by : Eric A. Posner
Download or read book A Proposal to Limit the Anti-Competitive Power of Institutional Investors written by Eric A. Posner and published by . This book was released on 2017 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent scholarship has shown that institutional investors may cause softer competition among product market rivals because of their significant ownership stakes in competing firms in concentrated industries. However, while calls for litigation against them under Section 7 of the Clayton Act are understandable, private or indiscriminate government litigation could also cause significant disruption to equity markets because of its inherent unpredictability and would fail to eliminate most of the harms from common ownership. To minimize this disruption while achieving competitive conditions in oligopolistic markets, the Department of Justice and the Federal Trade Commission should take the lead by adopting a public enforcement policy of the Clayton Act against institutional investors. Investors in firms in well-defined oligopolistic industries would benefit from a safe harbor from government enforcement of the Clayton Act if they either limit their holdings of an industry to a small stake (no more than 1% of the total size of the industry) or hold the shares of only a single “effective firm” per industry. Free-standing index funds that commit to pure passivity would not be limited in size. Using simulations based on empirical evidence, we show that under broad assumptions this policy would generate many times larger competitive gains than harms to diversification and other values. The policy would also improve corporate governance by institutional investors.
Download or read book Hedge Fund Activism written by Alon Brav and published by Now Publishers Inc. This book was released on 2010 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge Fund Activism begins with a brief outline of the research literature and describes datasets on hedge fund activism.
Book Synopsis Company Law and Sustainability by : Beate Sjåfjell
Download or read book Company Law and Sustainability written by Beate Sjåfjell and published by Cambridge University Press. This book was released on 2015-05-21 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book advances an innovative, multi-jurisdictional argument for the necessity of company law reform to reorient companies towards environmental sustainability.
Book Synopsis Portfolio Preferences of Foreign Institutional Investors by : Reena Aggarwal
Download or read book Portfolio Preferences of Foreign Institutional Investors written by Reena Aggarwal and published by World Bank Publications. This book was released on 2003 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Research Handbook on the Law and Economics of Competition Enforcement by : Kokkoris, Ioannis
Download or read book Research Handbook on the Law and Economics of Competition Enforcement written by Kokkoris, Ioannis and published by Edward Elgar Publishing. This book was released on 2022-08-16 with total page 507 pages. Available in PDF, EPUB and Kindle. Book excerpt: This incisive Research Handbook identifies and assesses the emerging trends in competition enforcement, investigating how such changes impact the enforcement approach of competition authorities and the behaviour of companies in an ever-evolving business and regulatory environment.
Book Synopsis The Handbook of the Economics of Corporate Governance by : Benjamin Hermalin
Download or read book The Handbook of the Economics of Corporate Governance written by Benjamin Hermalin and published by Elsevier. This book was released on 2017-09-18 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of the Economics of Corporate Governance, Volume One, covers all issues important to economists. It is organized around fundamental principles, whereas multidisciplinary books on corporate governance often concentrate on specific topics. Specific topics include Relevant Theory and Methods, Organizational Economic Models as They Pertain to Governance, Managerial Career Concerns, Assessment & Monitoring, and Signal Jamming, The Institutions and Practice of Governance, The Law and Economics of Governance, Takeovers, Buyouts, and the Market for Control, Executive Compensation, Dominant Shareholders, and more. Providing excellent overviews and summaries of extant research, this book presents advanced students in graduate programs with details and perspectives that other books overlook. Concentrates on underlying principles that change little, even as the empirical literature moves on Helps readers see corporate governance systems as interrelated or even intertwined external (country-level) and internal (firm-level) forces Reviews the methodological tools of the field (theory and empirical), the most relevant models, and the field’s substantive findings, all of which help point the way forward
Book Synopsis Institutional Owners and Competitive Rivalry by : Brian Lawrence Connelly
Download or read book Institutional Owners and Competitive Rivalry written by Brian Lawrence Connelly and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Scholars have increasingly recognized the importance of institutional owners in the life of the firm and have sought to explain how and when these owners influence firm-level strategies. In spite of evidence that these owners can and do affect broad strategies, there is little empirical support for the extent to which institutional investors involve themselves at the level of strategic competitive actions that firms undertake. This raises the question: "How do different types of institutional investors affect strategic competitive activity between firms?" Further, owners have a unique bearing on competitive activity insofar as they can simultaneously influence firms that are competing with each other. Therefore another important question is: "How are the relationships between institutional investors and strategic competitive activity affected when those investors hold stakes in both the focal firm and their competitor?" Borrowing from the accounting literature, this dissertation classifies institutional owners into three groups based on their historical trading behavior: transient, dedicated, and quasi-indexer. Findings from examination of the ownership holdings and strategic competitive activity of thirty-six Fortune 500 rivalries over the years 1997-2006 provide insight into these questions. High levels of dedicated institutional ownership are associated with greater strategic competitive activity whereas high transient institutional ownership is associated with low strategic competitive activity. The relationship between dedicated ownership and strategic competitive activity is moderated by common ownership of a focal firm and its rival. As dedicated ownership of the focal firm and its rival increase together, strategic competitive activity is reduced. The results presented here change the way we apply agency theory to explain firm governance. For competitive dynamics researchers, this study points to a previously unexplored means by which firms are motivated to engage, or not engage, in competitive activity. This study also has broad implications for managers, investors, and policymakers.
