Theory and Measurement of Common Ownership

The common ownership hypothesis, that the presence of diversified investors with holdings in competing firms distorts behavior away from own-firm profit maximization, has generated substantial controversy. Here, we focus on the problem of measuring common ownership. We reflect on three approaches, i...

Full description

Saved in:
Bibliographic Details
Published in:AEA papers and proceedings 2020-05, Vol.110, p.557-560
Main Authors: Backus, Matthew, Conlon, Christopher, Sinkinson, Michael
Format: Article
Language:English
Subjects:
COMMON OWNERSHIP
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The common ownership hypothesis, that the presence of diversified investors with holdings in competing firms distorts behavior away from own-firm profit maximization, has generated substantial controversy. Here, we focus on the problem of measuring common ownership. We reflect on three approaches, in order of the degree of modeling structure imposed. First, a purely descriptive summary of investor cross holdings; second, a theoretically motivated notion of “profit weights,” which captures the distortion without modeling the strategic interaction of firms; and finally, the fully structural approach, which consists of modeling both the distortions and the strategic game itself.
ISSN:2574-0768
2574-0776
DOI:10.1257/pandp.20201025