Anti-Competitive Effects of Common Ownership [pdf]

bc.edu

41 points·taofu··4 comments

The thesis is ~ that just having the same inactive institutional investors owning shares in competing companies discourages competition and hurts consumers.

I highly recommend reading the conclusion -- some excerpts/context: "Consolidation in the asset management industry has potentially large anti-competitive effects, even compared to mergers of natural competitors in the product market itself. "

"Consistent with investors’ economic incentives and established economic theory, we find that when firms don’t have incentives to compete, they don’t. Specifically, we use more than 10 years of market-firm-level panel data from the airline industry to show that common ownership has a large and significant positive effect on product prices."

This is fascinating, especially in light of the analysis of "The Network of Global Corporate [Ownership]" http://journals.plos.org/plosone/article?id=10.1371/journal.... -- it explores the graph/structure of ownership among the largest organizations.

relevant article?

https://news.ycombinator.com/item?id=10009740

I wonder if this could lead to firms like Vanguard and BlackRock not using their proxy votes. Or perhaps creating a system where index fund investors get to vote based on the shares they indirectly own. E.g. my 1000 shares of VTI means I get 10 votes at Apple shareholder meetings.

This is one thing the "little people" know, but can do nothing about because all the billionaires are colluding to protect themselves.

I've seen companies decide to not work on a project because one of the board members runs another company doing something similar. It's silly all the way down.

Reply on news.ycombinator.com