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Common ownership, institutional investors, and welfare

Oz Shy and Rune Stenbacka

Journal of Economics & Management Strategy, 2020, vol. 29, issue 3, 706-723

Abstract: 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.

Date: 2020
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