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Common ownership, institutional investors, and welfare
Author(s) -
Shy Oz,
Stenbacka Rune
Publication year - 2020
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12380
Subject(s) - diversification (marketing strategy) , common ownership , welfare , business , portfolio , institutional investor , competition (biology) , monetary economics , common stock , market competition , economics , market economy , finance , corporate governance , paleontology , context (archaeology) , ecology , marketing , biology
This study evaluates the effects of institutional investors' common ownership of firms competing in the same market. Overall, common ownership has two opposing effects: (a) it serves as a device for weakening market competition, and (b) it induces diversification, thereby reducing portfolio risk. We conduct a detailed welfare analysis within which the competition‐softening effects of an increased degree of common ownership is weighted against the associated diversification benefits.