Theory and Measurement of Common Ownership

Matthew Backus, Christopher Conlon and Michael Sinkinson

AEA Papers and Proceedings, 2020, vol. 110, 557-60

Abstract: The common ownership hypothesis, that the presence of diversified investors with holdings in competing firms distorts behavior away from own-firm profit maximization, has generated substantial controversy. Here, we focus on the problem of measuring common ownership. We reflect on three approaches, in order of the degree of modeling structure imposed. First, a purely descriptive summary of investor cross holdings; second, a theoretically motivated notion of "profit weights," which captures the distortion without modeling the strategic interaction of firms; and finally, the fully structural approach, which consists of modeling both the distortions and the strategic game itself.

JEL-codes: D21 G24 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1257/pandp.20201025

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