Common Ownership: Do Managers Really Compete Less?

Abstract

This Article addresses an important question in modern antitrust: when large investment funds have holdings across an industry, is competition depressed?

The question of the impact of common ownership on competition has gained much attention as the role of institutional shareholding has grown, with the funds of the three largest management companies holding in aggregate approximately 21% of the shares of a typical S&P 500 firm. It is a source of acute disagreement among scholars and policymakers, with some who believe common ownership does depress competition seeking antitrust law reforms that would significantly constrain how investment funds operate. Neglected in this vigorous debate, however, is a careful analysis of how the persons who in the first instance actually make the decisions that determine an industry’s competitiveness—firm managers—would act differently in the presence of common ownership. In essence, even if the common owners were to pressure firms to compete less, how, if at all, would that change the structure of incentives within which these managers work?