Frenemies: Corporate Advertising Under Common Ownership

Lu, Ruichang; Shen, Qiaowei; Wang, Tenghui; Zhang, Xiaojun

doi:10.1287/mnsc.2021.4098

Cited by 16 publications

(8 citation statements)

References 67 publications

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“…Our baseline DiD test sample consists of 7,087 firm-year observations from 225 treatment firms and 1,182 control firms. The sample size is comparable to those reported in He and Huang (2017) and Lu et al (2022). Using the treatment and control firm-year observations, we estimate the following DiD regression:…”

Section: Dep Varmentioning

confidence: 84%

Common institutional ownership and stock price crash risk

Chen,

Ma,

et al. 2023

Contemporary Accting Res

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This paper presents new evidence on the economic benefits arising from common institutional ownership. We find a negative and significant effect of common institutional ownership on stock price crash risk. This effect is robust to a battery of robustness checks and is causal according to some identification tests, including difference‐in‐differences analyses on financial institution mergers. We find evidence that the negative effect is attributable to the monitoring role of common institutional owners—a role that is enabled by common owners’ lower information processing cost and greater monitoring incentives owing to governance externalities. We also find that common owners negatively influence crash risk through constraining bad news hoarding and that common owners are more likely to force CEO turnover when a firm has higher crash risk. Overall, our results suggest that common institutional shareholders play a unique and effective monitoring role that fends off stock price crashes.This article is protected by copyright. All rights reserved.

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Section: Dep Varmentioning

confidence: 84%

Common institutional ownership and stock price crash risk

Chen,

Ma,

et al. 2023

Contemporary Accting Res

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“…However, as the capital market evolves, a new kind of peer has emerged that does not necessarily belong to the same industry or geographic area. Instead, firms are linked by a common shareholder and consider each other as investee peers via this common provider of financial resources (Connelly et al, 2019; Lu et al, 2021). Shareholders invest in many firms and frequently assess investee performance based on a set of financial and non‐financial criteria to decide which firms to add or drop from their portfolio (Cox et al, 2004).…”

Section: Theoretical Background and Hypotheses Developmentmentioning

confidence: 99%

“…Investee peers are under common ownership—a type of ownership structure in which the same shareholder simultaneously holds ownership stakes in multiple firms (Azar et al, 2018; Connelly et al, 2019). Investee peers are therefore firms that share shareholders with the focal firm and compete for the resources granted by the same shareholders (Lu et al, 2021; Shi et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Dong

Chen

2023

Corp Soc Responsibility Env

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Scholars have investigated the industry peer effect of corporate social responsibility (CSR). Borrowing from the awareness-motivation-capability (AMC) framework from competitive dynamics literature, we shift attention to focus on an important but neglected peer-investee peers-and argue that the corporate environmental responsibility (CER) of investee peers positively affects a focal firm's CER. Using data from Chinese listed firms from 2008 to 2018, we find that firms invest more on CER in response to increasing CER investment by investee peer firms (more awareness). This relationship is further affected by the firm's motivation (when the common shareholder is a foreign investor) and ability (when the focal firm's financial performance is high) to respond to competitive threats and tensions from investee peers. Our study contributes to the literature on CSR (specifically CER) by introducing the role of investee peers and extending the AMC framework to the CER literature.

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“…However, common blockholders concentrate their investments by purchasing firms in selected industries, based on the belief that this concentration can compensate for the cost of under‐diversification (Hemphill & Kahan, 2019). Previous studies on the US stock market focus on whether the common ownership of institutional investors inhibits market competition (Antón et al, 2023; Azar et al, 2018; Cheng et al, 2022; Lu et al, 2022). However, the existing conclusions are controversial (Dennis et al, 2022; Koch et al, 2021; Lewellen & Lowry, 2021).…”

Section: Introductionmentioning

confidence: 99%

Collusion or governance? Common ownership and corporate risk‐taking

Yao,

Guo,

Sensoy

et al. 2023

Corporate Governance

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Research QuestionDisputes over the corporate governance impacts of common ownership continue. Differentiating from existing studies, we focus on the Chinese stock market, exploiting the Top 10 Shareholding File, which includes various investors besides institutional investors, to study the impact of common ownership built through blockholders on corporate risk‐taking behavior.Research FindingsWe find that firms with higher common ownership are less likely to engage in corporate risk‐taking, with concomitant decreases in future growth rates. Mechanism analysis shows that blockholders' common ownership exerts its influence through increasing market concentration, with concomitant lessening of market competition. Interestingly, further analyses indicate that, in contrast to blockholders, ownership connectedness built by mutual fund families significantly raises corporate risk‐taking along with growth. However, individual investors' common ownership does not show the significant statistical relationship with corporate risk‐taking.Theoretical ImplicationsWe add to the debate on common ownership on corporate governance. Consistent with the anti‐competition stream of literature, the risk‐taking‐reduction role we identify for blockholder common ownership supports the theory of anti‐competition. Our results highlight the need to consider the heterogeneity of common ownership.Policy ImplicationsWhile blockholder common ownership is evidenced to have a negative effect on corporate risk‐taking, with, by extension, a negative impact on economic development, our results also suggest that efficient monitoring mitigates these effects. We also document an interesting heterogeneity in investor types. Mutual fund common ownership, in contrast to blockholder common ownership, is associated with higher risk‐taking and more robust firm growth. This suggests the positive role of institutions in corporate governance and the necessity of considering the heterogeneity of common ownership.

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Frenemies: Corporate Advertising Under Common Ownership

Cited by 16 publications

References 67 publications

Common institutional ownership and stock price crash risk

Common institutional ownership and stock price crash risk

Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Collusion or governance? Common ownership and corporate risk‐taking

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