Does Common Ownership Really Increase Firm Coordination?

Does Common Ownership Really Increase Firm Coordination?

Katharina Lewellen, Michelle Lowry

Series number :

Serial Number: 
741/2021

Date posted :

March 22 2021

Last revised :

March 22 2021
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Keywords

  • Common ownership • 
  • institutional investors • 
  • Corporate governance

A growing number of studies suggest that common ownership caused cooperation among firms to increase and competition to decrease. We take a closer look at four approaches used to identify these effects. We find that the effects that some studies have attributed to common ownership are caused by other factors, such as differential responses of firms (or industries) to the 2008 financial crisis.

We propose a modification to one of the previously used empirical approaches that is less sensitive to these issues. Using this to re-evaluate the link between common ownership and firm outcomes, we find little robust evidence that common ownership affects firm behavior.

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Published in

Published in: 
Publication Title: 
Journal of Financial Economics (JFE), Forthcoming

Authors

Real name:
Katharina Lewellen