Thursday, September 26, 2019
Haifeng Wang, The Vanguard Group, Inc., Jan-Carl Plagge, The Vanguard Group, Inc., James Rowley, The Vanguard Group, Inc., and Roger A Aliaga-Diaz, The Vanguard Group, Inc.provide Common Ownership and Industry Profitability: A Crossindustry View.
ABSTRACT: Our paper contributes to the common ownership debate by empirically assessing the link between common ownership and profitability as a proxy for market competition. Rather than focusing on single industries, as most related studies do, we assess the common ownership hypothesis in the aggregate, using a panel of about 3,000 U.S. firms in about 200 industries over a 21-year period. We hypothesize that if anticompetitive effects due to common ownership were present within individual industries, then the same anticompetitive outcomes should be observed when the data is expanded to cover all industries and over an extended period of time. We explore the statistical relationship between our chosen measure of common ownership and profitability across multiple model specifications, such as (1) two alternative econometric models, (2) different sets of control variables, (3) different time periods, and (4) four variations of MHHIΔ. We do not find conclusive evidence that common ownership is associated with industry-level profit margins.