SEMINAR ADVANCED CORPORATE FINANCE: CORPORATE GOVERNANCE

Discussion Points
Session: 4

Paper: Azar et al. (2018)

RESEARCH QUESTION (ONE SENTENCE)

How does common ownership affect competition, specifically in terms of pricing and market power?

CONTRIBUTION TO THE LITERATURE / LINK TO OTHER PAPERS IN SESSION (TWO SENTENCES)

Contribution: Existing empirical literature largely assumes that common ownership interests by
financial institutions do not matter for firms’ objectives and product market outcomes. However, this
paper contradicts this assumption by providing evidence of substantial anticompetitive motivations
stemming from common ownership connections at the market level, and it further establishes a causal
relationship between the concentration of common ownership and an increase in product prices.

Link: Giroud et al. (2010) utilized the Herfindahl-Hirschman Index (HHI) to distinguish between
competitive and non-competitive industries. However, as demonstrated by Azar et al. (2018), this
measure does not account for common ownership, therefore, considering the findings of Azar et al.
(2018), the results of Giroud et al. (2010) might be subject to reinterpretation.

LIMITATIONS (AT MOST THREE BULLET POINTS, ONE SENTENCE EACH)

1. The paper’s conclusions are based on data from the U.S. airline industry and while this
provides a detailed case study, the findings might not be generalizable to other industries or
regions.
2. The paper attributes changes in ticket prices and market concentration to common ownership .
However, there could be other factors at play that were not accounted for in the analysis such
as factors specific to airlines and passengers (airport dominance or the difference between full
service carriers and low-cost carriers)

AVENUES FOR FUTURE RESEARCH (AT MOST THREE BULLET POINTS, ONE SENTENCE EACH)

1. The study focuses on the U.S. airline industry, future research could expand the scope to other
industries and regions to examine if the findings hold true across different contexts.
2. Since the paper raises important questions about the role of antitrust authorities in regulating
common ownership, future research could investigate how regulatory policies could be
designed to mitigate the anticompetitive effects of common ownership.