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Common Ownership Does Not Have Anticompetitive Effects in the Airline Industry
Author(s) -
DENNIS PATRICK,
GERARDI KRISTOPHER,
SCHE CAROLA
Publication year - 2022
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.13176
Subject(s) - business , bankruptcy , equity (law) , control (management) , common ownership , common stock , product market , ticket , market share , industrial organization , monetary economics , finance , market economy , economics , paleontology , context (archaeology) , computer security , management , political science , computer science , law , biology , incentive
Institutions often own equity in multiple firms that compete in the same product market. Prior research has shown that these institutional “common owners” induce anticompetitive pricing behavior in the airline industry. This paper reevaluates this evidence and shows that the documented positive correlation between common ownership and airline ticket prices stems from the market share component of the common ownership measure, and not the ownership and control components. We further show that the results are sensitive to measures of investor control and to assumptions about equity holders' ownership and control during bankruptcy.