Paper #1848

Título:

Ownership diversification and product market pricing Incentives

Autores:

Albert Banal-Estañol, Jo Seldeslachts y Xavier Vives

Fecha:

Noviembre 2022

Resumen:

We link investor ownership to profit loads on rival firms by the managers of a firm. We propose a theory model in which we distinguish between passive and active investors' holdings, where passive investors are relatively more diversified. We find that if passive investors become relatively bigger, then common ownership incentives increase. We show that these higher incentives, in turn, are linked to higher firm markups. We empirically confirm these relationships for public US firms in the years 2004-2012, where the financial crisis coincides with passive investors' rise. The found effects are small but non-negligible.

Área de investigación:

Economía de la Empresa y Organización Industrial

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