Facilitating Tacit Collusion: A New Perspective on Common Ownership and Voluntary Disclosure

Common ownership (competing firms with overlapping ownership) has become increasingly prevalent over the last several decades. Recent studies of the phenomenon have produced two important findings.  First, common ownership is associated with less intense competition. Studies posit that managers act in accordance with the preference of common owners for anti-competitive actions that lead to higher group profits rather than cutthroat actions that maximize individual firm profits. Second, common ownership is associated with more voluntary disclosure, which recent work has  attributed to the lower costs of disclosure arising from the reduced competition and common owners’ demand more disclosure. We predict and … Read more