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Jie (Jack) He, Jiekun Huang, Product Market Competition in a World of Cross-Ownership: Evidence from Institutional Blockholdings, The Review of Financial Studies, Volume 30, Issue 8, August 2017, Pages 2674–2718, https://doi.org/10.1093/rfs/hhx028
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We analyze the effects of institutional cross-ownership of same-industry firms on product market performance and behavior. Our results show that cross-held firms experience significantly higher market share growth than do non-cross-held firms. We establish causality by relying on a difference-in-differences approach based on the quasi-natural experiment of financial institution mergers. We also find evidence suggesting that institutional cross-ownership facilitates explicit forms of product market collaboration (such as within-industry joint ventures, strategic alliances, or within-industry acquisitions) and improves innovation productivity and operating profitability. Overall, our evidence indicates that cross-ownership by institutional blockholders offers strategic benefits by fostering product market coordination.
Received November 12, 2015; editorial decision December 31, 2016 by Editor Itay Goldstein.