2024/11/21 by Münster, Markus, Walther, Martin
#300 Sozialwissenschaften::330 Wirtschaft::332 Finanzwirtschaft #anticompetitive effects #common ownership #ownership structure #stock return correlation #strategic investors
paper · doi:10.14279/depositonce-22262
Recent research suggests that competition is reduced by common ownership. Based on this idea, we build a model in which strategic investors have an incentive to reduce the correlation between companies they have invested in. Therefore, we hypothesize that pairwise correlations between stock returns decrease with increasing common strategic ownership. To test this hypothesis empirically, we construct a measure that captures the presence of strategic investors in both companies. Using NYSE data and several control variables, we find a negative relation between this measure and pairwise correlations. This result provides support for the anticompetitive effects of common ownership.