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Common-Ownership Concentration and Corporate Conduct

Martin C. Schmalz ()
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Martin C. Schmalz: Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109, USA

Annual Review of Financial Economics, 2018, vol. 10, issue 1, 413-448

Abstract: The question of whether and how partial common-ownership links between strategically interacting firms affect firm objectives and behavior has been the subject of theoretical inquiry for decades. Since then, the growth of intermediated asset management and consolidation in the asset management sector has led to more pronounced common-ownership links at the level at which corporate control is exercised. Recent empirical research has provided evidence consistent with the literature's prediction that common-ownership concentration (CoOCo) can affect product market outcomes. The resulting antitrust concerns have received worldwide attention. However, because CoOCo can change the objective function of a firm, the potential implications span all fields of economics that involve corporate conduct, including corporate governance, strategy, industrial organization, and financial economics. This article connects the papers establishing the theoretical foundations, reviews the empirical and legal literatures, and discusses challenges and opportunities for future research.

Keywords: ownership; control; network; industry concentration; antitrust; objective of the firm; shareholder unanimity (search for similar items in EconPapers)
JEL-codes: D21 D22 D43 G23 G30 G32 G34 K21 L13 L14 L21 L25 L41 L93 (search for similar items in EconPapers)
Date: 2018
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