Ownership Diversification and Product Market Pricing Incentives

Albert Banal-Estanol, Jo Seldeslachts and Xavier Vives

No 17686, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We link investor ownership to profit loads on rival firms by the managers of a firm. We propose a theory model in which we distinguish between passive and active investors’ holdings, where passive investors are relatively more diversified. We find that if passive investors become relatively bigger, then common ownership incentives increase. We show that these higher incentives, in turn, are linked to higher firm markups. We empirically confirm these relationships for public US firms in the years 2004-2012, where the financial crisis coincides with passive investors’ rise. The found effects are small but non-negligible.

Date: 2022-11
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP17686 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Ownership Diversification and Product Market Pricing Incentives (2022)
Working Paper: Ownership Diversification and Product Market Pricing Incentives (2022)
Working Paper: Ownership diversification and product market pricing Incentives (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17686

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17686

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().