University of Missouri School of Law Scholarship Repository
Abstract
Recent empirical research purports to demonstrate that institutional investors\u27 common ownership of small stakes in competing firms causes those firms to compete less aggressively, injuring consumers. A number of prominent antitrust scholars have cited this research as grounds for limiting the degree to which institutional investors may hold stakes in multiple firms that compete in any concentrated market. This Article contends that the purported competitive problem is overblown and that the proposed solutions would reduce overall social welfare. With respect to the purported problem, we show that the theory of anti-competitive harm from institutional investors\u27 common ownership is implausible and that the empirical studies supporting the theory are methodologically unsound. The theory fails to account for the fact that intra-industry diversified institutional investors are also inter-industry diversified, and it rests upon unrealistic assumptions about managerial decision-making. The empirical studies purporting to demonstrate anti-competitive harm from common ownership are deficient because the inaccurately assess institutional investors\u27 economic interests and employ an endogenous measure that precludes causal inferences
