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...

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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
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COMMON OWNERSHIP
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description 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.
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source JSTOR Archival Journals and Primary Sources Collection; American Economic Association; EconLit with Full Text【Remote access available】; Business Source Ultimate (EBSCOHost)
subjects COMMON OWNERSHIP
title Theory and Measurement of Common Ownership
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