A Critical Review of the Common Ownership Literature

Kristopher Gerardi, Michelle Lowry and Carola Schenone ()
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Kristopher Gerardi: Federal Reserve Bank of Atlanta, Atlanta, Georgia, USA
Michelle Lowry: LeBow College of Business, Drexel University, Philadelphia, Pennsylvania, USA
Carola Schenone: McIntire School of Commerce, University of Virginia, Charlottesville, Virginia, USA

Annual Review of Financial Economics, 2024, vol. 16, issue 1, 89-114

Abstract: The rapid growth in index funds and significant consolidation in the asset-management industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers. A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policy makers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. In this article, we provide an overview of the theoretical underpinnings of common ownership and critically review the empirical literature. Measurement issues and identification challenges are detailed, and a discussion of plausible causal mechanisms is provided. Across the newest papers employing the most credible identification techniques, relatively little evidence has been found that common ownership causes lower competition. However, further research is necessary before broad conclusions can be reached.

Keywords: common ownership; product market competition; institutional investors (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 G38 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1146/annurev-financial-082123-105841

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