When does overlapping ownership soften competition? The role of agency frictions and repeated interaction
Type
journal article
Date Issued
2023-05-18
Author(s)
Abstract
We document novel stylized facts about the effects of overlapping ownership on profits. We find that overlapping ownership is associated with lower profit margins when corporate governance is bad and in industries prone to softer competition due to tacit collusion. We build a simple dynamic model, where-due to agency frictions-firm managers derive a private benefit from deviating from tacit collusion. We find that overlapping ownership can increase, decrease, or have no effect on profits, depending on the extent of the agency friction and an industry's disposition towards softer competition. Our model is consistent with the stylized facts and can help reconcile theory with the mixed effects of overlapping ownership on profit found in the data.
Language
English
Keywords
ownership
industry competition
repeated interaction
agency frictions D21
D22
G30
L13
L41
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Name
ssrn-4452092.pdf
Size
7.76 MB
Format
Adobe PDF
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