Common Ownership Concentration and Corporate Conduct

Common Ownership Concentration and Corporate Conduct

By Martin C. Schmalz (University of Michigan)

Abstract:     The question whether and how ownership between strategically interacting firms affects firm behavior has been the subject of theoretical inquiry for decades. Recent empirical research has provided evidence for the validity of some of the literature’s key predictions. In addition, consolidation and increasing concentration in the asset management industry has led to more pronounced linkages between firms, thus fueling a resurgence of the literature. The resulting antitrust concerns have received much attention from policy makers worldwide. However, the implications are more general: common ownership concentration (CoOCo) affects the objective function of the firm, and therefore has implications for all subfields of economics with an interest in corporate behavior — including corporate governance, strategy, industrial organization, and all of financial economics. This article connects the papers establishing the theoretical foundations and reviews the existing empirical literature with a focus on challenges and opportunities for future research.

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