Common Ownership, Competition, and Corporate Governance
Vincenzo Denicolò, Fausto Panunzi
Management Science · 2025 · Volume 71 · Issue 5
Abstract
This paper presents a theoretical framework for determining the ownership stakes held by financial investors in companies competing in the same product market, commonly referred to as the level of common ownership. In our model, these investors are primarily motivated by the anticipation of capital gains resulting from the impact of common ownership on product market competition, which enhances profitability for the firms involved. However, common ownership also undermines effective corporate governance by diminishing blockholders’ incentives to engage in value-enhancing behaviors, such as managerial monitoring. These adverse effects on corporate governance act as limiting factors, ultimately determining the equilibrium level of common ownership. This paper was accepted by Joshua Gans, business strategy.
Keywords
antitrust, common ownership, corporate governance
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