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Common Ownership Institutional Investors And Welfare
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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 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, 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 ESG and Responsible Institutional Investing Around the World: A Critical Review by : Pedro Matos
Download or read book ESG and Responsible Institutional Investing Around the World: A Critical Review written by Pedro Matos and published by CFA Institute Research Foundation. This book was released on 2020-05-29 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: This survey examines the vibrant academic literature on environmental, social, and governance (ESG) investing. While there is no consensus on the exact list of ESG issues, responsible investors increasingly assess stocks in their portfolios based on nonfinancial data on environmental impact (e.g., carbon emissions), social impact (e.g., employee satisfaction), and governance attributes (e.g., board structure). The objective is to reduce exposure to investments that pose greater ESG risks or to influence companies to become more sustainable. One active area of research at present involves assessing portfolio risk exposure to climate change. This literature review focuses on institutional investors, which have grown in importance such that they have now become the largest holders of shares in public companies globally. Historically, institutional investors tended to concentrate their ESG efforts mostly on corporate governance (the “G” in ESG). These efforts included seeking to eliminate provisions that restrict shareholder rights and enhance managerial power, such as staggered boards, supermajority rules, golden parachutes, and poison pills. Highlights from this section: · There is no consensus on the exact list of ESG issues and their materiality. · The ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” · Investors should be positioning themselves for increased regulation, with the regulatory agenda being more ambitious in the European Union than in the United States. Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals. CFA Institute provides an exemplary case in its Future of Finance series (www.cfainstitute.org/research/future-finance). For the academic community, I suggest we ramp up research aimed at tackling some of the open questions around the pressing societal goals of ESG investing. I am optimistic that practitioners and academics will identify meaningful ways to better harness the power of global financial markets for addressing the pressing ESG issues facing our society.
Book Synopsis Common Institutional Ownership and Product Market Threats by : Omesh Kini
Download or read book Common Institutional Ownership and Product Market Threats written by Omesh Kini and published by . This book was released on 2019 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: Overlapping institutional ownership in the same industry can have anti-competitive effects but can also elevate product market competition by promoting investments with industry spillovers. Using a text-based product market threat variable, we find that firms with higher common ownership face greater competitive threats. This pro-competitive effect of common ownership is stronger in industries with greater potential for investment spillovers. Evidence from firm investments and markup further corroborates our finding that common ownership enhances product market threats. Our results suggest that implementing additional regulatory requirements on common ownership can potentially be welfare-destroying in industries with strong spillover opportunities.
Book Synopsis Financial Transaction Costs and Industrial Performance by : Julio Rotemberg
Download or read book Financial Transaction Costs and Industrial Performance written by Julio Rotemberg and published by Palala Press. This book was released on 2018-03-02 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work was reproduced from the original artifact, and remains as true to the original work as possible. Therefore, you will see the original copyright references, library stamps (as most of these works have been housed in our most important libraries around the world), and other notations in the work. This work is in the public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. As a reproduction of a historical artifact, this work may contain missing or blurred pages, poor pictures, errant marks, etc. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Book Synopsis The Changing Face of Corporate Ownership by : Michael J. Rubach
Download or read book The Changing Face of Corporate Ownership written by Michael J. Rubach and published by Routledge. This book was released on 2013-10-28 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines the shareholder activism of institutional investors, and the effect of this activism on portfolio performance. By focusing on 118 institutional investors headquartered in the United States, the book is unique in addressing the shareholder activism of a large sample. Institutional shareholder activism is defined to include both traditional mechanisms of influence (i.e. filing shareholder proposals) and relationship investing. Institutional owners included private and public pension funds, mutual funds, bank trusts, insurance companies, endowments, and foundations. These institutional owners differ substantially, and these differences lead institutions to use their ownership power to pursue different philosophies and actions. Some institutions follow a passive governance policy, While others adopt an activist role. This book seeks to answer four questions: (1) Are institutional owners actively involved in the strategic affairs of companies in their portfolios? (2)Which forms of activism do institutional owners employ (either confrontational mechanisms, such as filing shareholder proposals, or relationship building mechanisms)? (3)Which forms of activism employed are most effective? and (4) Does the institutional type affect its pursuit of shareholder activism? In answering these questions the author suggests new important results that in many cases are contrary to what prior reports of the activities by a small number of institutional owners may intimate.
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 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 Common Institutional Ownership and Earnings Management by : Santhosh Ramalingegowda
Download or read book Common Institutional Ownership and Earnings Management written by Santhosh Ramalingegowda and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the relation between earnings management and block ownership of same-industry peer firms by a common set of institutional investors (common institutional ownership). This relation is important given the tremendous growth of common institutional ownership and the significant influence of blockholders on financial reporting. We hypothesize that common institutional ownership mitigates earnings management by enhancing institutions' monitoring efficiency and by encouraging institutions to internalize the negative externality of a firm's earnings management on peer firms' investments. Consistent with our hypothesis, we find that higher common institutional ownership is related to less earnings management. Analyses of a quasi-natural experiment based on financial institution mergers show that this negative relation is unlikely to be driven by the endogeneity of common institutional ownership. Cross-sectional tests provide evidence that the negative relation is stronger among firms for which common institutional ownership is likely to generate a greater reduction in institutions' information acquisition and processing costs, and among firms whose severe financial misstatements are more likely to distort co-owned peer firms' investments, supporting both mechanisms underlying our hypothesis. Our findings inform the ongoing debate on the costs and benefits of common institutional ownership by highlighting an important benefit: the enhanced monitoring of financial reporting.
Book Synopsis The Rise of Fiduciary Capitalism by : James P. Hawley
Download or read book The Rise of Fiduciary Capitalism written by James P. Hawley and published by University of Pennsylvania Press. This book was released on 2000-10-06 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traces the rise of public and private pension funds, which now control as much as 50 percent of the equity in American corporations, and argues that shareholders in those funds could use their power to make corporations more responsive to social needs.
Book Synopsis Global Food Value Chains and Competition Law by : Ioannis Lianos
Download or read book Global Food Value Chains and Competition Law written by Ioannis Lianos and published by Cambridge University Press. This book was released on 2022-05-05 with total page 661 pages. Available in PDF, EPUB and Kindle. Book excerpt: The food industry is a notoriously complex economic sector that has not received the attention it deserves within legal scholarship. Production and distribution of food is complex because of its polycentric character (as it operates at the intersection of different public policies) and its dynamic evolution and transformation in the last few decades (from technological and governance perspectives). This volume introduces the global value chain approach as a useful way to analyse competition law and applies it to the operations of food chains and the challenges of their regulation. Together, the chapters not only provide a comprehensive mapping of a vast comparative field, but also shed light on the intricacies of the various policies and legal fields in operation. The book offers a conceptual and theoretical framework for competition authorities, companies and academics, and fills a massive gap in the competition policy literature dealing with global value chains and food.
Book Synopsis Corporate Governance Strengthening Latin American Corporate Governance The Role of Institutional Investors by : OECD
Download or read book Corporate Governance Strengthening Latin American Corporate Governance The Role of Institutional Investors written by OECD and published by OECD Publishing. This book was released on 2011-07-01 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report reflects long-term, in-depth discussion and debate by participants in the Latin American Roundtable on Corporate Governance.
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 A Tale of Two Networks by : Florian Ederer
Download or read book A Tale of Two Networks written by Florian Ederer and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the welfare implications of the rise of common ownership in the United States from 1994 to 2018. We build a general equilibrium model with a hedonic demand system in which firms compete in a network game of oligopoly. Firms are connected through two large networks: the first reflects ownership overlap, the second product market rivalry. In our model, common ownership of competing firms induces unilateral incentives to soften competition. The magnitude of the common ownership effect depends on how much the two networks overlap. We estimate our model for the universe of U.S. public corporations using a combination of firm financials, investor holdings, and text-based product similarity data. We perform counterfactual calculations to evaluate how the efficiency and the distributional impact of common ownership have evolved over time. According to our baseline estimates the welfare cost of common ownership, measured as the ratio of deadweight loss to total surplus, has increased nearly tenfold (from 0.3% to over 4%) between 1994 and 2018. Under alternative assumptions about governance, the deadweight loss ranges between 1.9% and 4.4% of total surplus in 2018. The rise of common ownership has also resulted in a significant reallocation of surplus from consumers to producers.
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 Anticompetitive Effects of Common Ownership by : José Azar
Download or read book Anticompetitive Effects of Common Ownership written by José Azar and published by . This book was released on 2018 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many natural competitors are jointly held by a small set of large institutional investors. In the US airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities. Within-route changes in common ownership robustly correlate with route-level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost - reduced product market competition - accompanies the private benefits of diversification and good governance.
