Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266605 
Year of Publication: 
2022
Series/Report no.: 
DIW Discussion Papers No. 2023
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
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.
Subjects: 
Common ownership
investor diversification
product markets
Document Type: 
Working Paper

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