In this paper we study the market effects of common ownership in a setting where
any ownership structure and any shareholder size is allowed. We depart from the standard
reduced form approach of assuming that firms maximize a weighted average of shareholders'
portfolios, and instead study the collective choice problem of shareholders head-on. In our
model shareholder meetings elect firm managers by one-share one-vote majority rule.
Managers differ in their degree of aversion to the negative externality of production. Voting
for socially concerned managers therefore provides a mechanism for common owners to
direct away the firm from own profit towards industry profit maximization. We show that
allowing shareholders of any size to freely diversify their portfolio leads to monopolistic
outcomes. Our results have the novel policy implication that the anticompetitive effects of
common ownership can emerge even when blockholders are undiversified, but the majority
of shares belongs to small diversified shareholders, indicating that small diversified portfolios
may also be a threat.
Zoom Link: https://uoc-gr.zoom.us/j/97374751400?pwd=UjZ4cUVaSXZ2bnZUT1BNSVhySFlDQT09
