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A Critical Review of the Common Ownership Literature
Journal article   Open access   Peer reviewed

A Critical Review of the Common Ownership Literature

Kristopher Gerardi, Michelle Lowry and Carola Schenone
Annual review of financial economics, v 16(1), pp 89-114
01 Nov 2024
DOI: https://doi.org/10.1146/annurev-financial-082123-105841
url
https://doi.org/10.1146/annurev-financial-082123-105841View
Published, Version of Record (VoR) Open

Abstract

Business & Economics Business, Finance Economics Social Sciences
The rapid growth in index funds and significant consolidation in the assetmanagement industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers. A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policy makers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. In this article, we provide an overview of the theoretical underpinnings of common ownership and critically review the empirical literature. Measurement issues and identification challenges are detailed, and a discussion of plausible causal mechanisms is provided. Across the newest papers employing the most credible identification techniques, relatively little evidence has been found that common ownership causes lower competition. However, further research is necessary before broad conclusions can be reached.

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