Creating a winning portfolio
Leading institutional investment firms have shares in many European companies at once. This concept was the key factor for exploring the extent of common ownership created by institutional investors for publicly traded corporations in Europe. This research project, 'New developments in competition policy' (COMPPOL), explored the place where the lines in this network cross. Today's investors operate in an increasingly complex landscape. Judging the potential for market power in an industry can be difficult. Mergers and acquisitions (M&As) are obvious forms of potential conflict for decreasing competitiveness and there is already policy that addresses M&A issues. Researchers in this EU-funded project showed that industries with a higher percentage of common ownership networks within the same industry have higher mark-ups. This supports the idea that big portfolios of large investors could lead to industry outcomes that are anti-competitive. The researchers recommend that EU authorities review common ownership structures while assessing European industries for market power. Identifying problems here will send authorities in the right direction to monitor and protect competition in EU markets.
Keywords
Institutional investor, product market, common ownership, publicly traded corporation, competition policy, market power, mergers and acquisitions, portfolio
