Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
The Effect of Common Ownership on Profits : Evidence From the U.S. Banking Industry
Theory predicts that "common ownership" (ownership of rivals by a common shareholder) can be anticompetitive because it reduces the weight firms place on their own profits and shifts weight toward rival firms held by common shareholders. In this paper we use accounting data from the banking industry to examine empirically whether shifts in the profit weights are associated with shifts in profits. We present the distribution of a wide range of estimates that vary the specification, sample restrictions, and assumptions used to calculate the profit weights. The distribution of estimates is roughly centered around zero, but we find statistically significant estimates in either direction in some cases. Economically, most estimates are fairly small. Our interpretation of these findings is that there is little evidence for economically important effects of common ownership on profits in the banking industry.
Cite this item
Jacob P. Gramlich & Serafin J. Grundl, The Effect of Common Ownership on Profits : Evidence From the U.S. Banking Industry, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2018-069, 03 Oct 2018.
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
Keywords: Banking ; Common Ownership ; Competition ; Profits
This item with handle RePEc:fip:fedgfe:2018-69
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