Diversification, Common Ownership, and Strategic Incentives

Albert Banal-Estañol, Jo Seldeslachts and Xavier Vives

AEA Papers and Proceedings, 2020, vol. 110, 561-64

Abstract: We argue that within-industry investor diversification is directly related to common ownership incentives (profit loads on rival firms by the manager of a firm) in product markets. Because of their respective investment strategies, passive investors are naturally more diversified than active investors. If more money flows from active toward passive investors, then common ownership incentives increase. The opposite occurs if active investors receive more money flows. This pattern is shown in two example US industries for the period 2004–2012.

JEL-codes: D22 G24 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/pandp.20201026

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