Cross-ownership of firms is one way to strengthen business relations between firms, even if they are competing in the same industry. This study’s purpose, conducted by “Jie He & Jeikun Huang,” is to analyze whether institutional cross-ownership of same industry firms affects product market behavior and how it does so. The main focus of the study is on institutional block holders, their role in cross-ownership of firms, and how they can be beneficial factors in these cross-held firms’ product market share through different mechanisms. According to “Farlex” financial dictionary, these institutional block holders are shareholders/investors with an exceptionally large amount or value of stock. These investors could be organizations that invest or manage assets, such as mutual funds and holding companies. In this study, a block is defined as when the holding (institutional investment) exceeds five percent of a company’s equity. A cross- holding occurs when a given institution simultaneously holds more than one block in the same four-digit- SIC industry (page 7).Throughout the study, there are two main hypotheses tested to determine the relation between block holders of cross-held firms and market share growth. The first hypothesis states that firms cross-held by institutional block holders experience a significantly higher market share growth relative to similar non-cross-held firms. Also, the study hypothesizes that cross-ownership of firms by institutional block holders offers strategic benefits by fostering product market coordination, and that coordination should be more likely and more effective in industries that require a greater extent of strategic interactions. The authors use several strands of existing literature to rela... ... middle of paper ... ... an advantage of a higher profit margin to cross-held firms. (Table 7 Panel C) 4- Portfolio Performance: the results showed a 1.9 percentage point advantage in one-year buy and hold abnormal returns on cross-held portfolios (Table 8). In conclusion, the study shows that cross proprietorship by institutional block holders offers vital profits by encouraging product market coordination between firms. By identifying a causal relationship between cross ownership and product market outcomes and investigating potential components, this study has critical ramifications for studies on the collaboration of firms’ proprietorship/authoritative structure and the behavior of their product markets. It also highlights the point that any future studies on product market competition ought to deliberately analyze firms' internal relations through the ownership of common equity.
To differentiate monopolies from trusts, it must be said that single companies were able to form monopolies when in control of “nearly all of one type of product or service… [This] affects the consu...
Such as the case of two major players in the entertainment community of Sirius and XM who both have a majority of the marketplace in the satellite radio business and their talks of consolidating both businesses into one. This article on Ars Technica (Lasar, 2008) expands on the idea that these corporate entities should not be allowed to merge into one corporation, but above that should also be fined for even considering the idea in back rooms and locked boardrooms. Using the model case of the Sherman Anti-Trust act in Standard Oil, the corporation floated around having anywhere between eighty five percent and ninety five percent. With those numbers, XM and Sirius would fall into the numerical category of filling that condition of a monopoly.
Best Buy operates in an oligopolistic market where there are significant barriers to entry and few large firms dominate the market by selling identical goods. Best Buy is a non-collusive oligopolist, existing in a strategic environment where firms do not cooperate, yet are interdependent due to the fact that a firm’s action affects the market. Recently, Best Buy experienced an increase in demand, increasing its revenues and profits.
...urchasing the company's own shares, acquiring new companies and profitable assets, and reinvesting in financial assets (McClure, 2004)
company's equity are purchased, i.e. the buyer gains complete control over its target. Equity stakes of lesser percentages are referred to as minority holdings.
The Australian Stock Exchange’s (ASX) Corporate Governance Council (2014) defines corporate governance as “A framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations”. One goal of corporate governance is for the board members to increase shareholder value (Tricker 2015). In order to achieve this, it is important that the board act appropriately and justly so that the best interest of investors are protected. This report will explore the effectiveness of JB Hi-Fi’s corporate governance. JB Hi-Fi is Australia’s largest home entertainment retailer, selling a variety of products at discounted prices. Over the years, they have maintained a substantial
Dimensional's value strategies are based on the Fama/French research in multifactor portfolios designed to capture the return premiums associated with high book-to-market (BtM) ratios.
The essential factor of an oligopolistic firm is interdependence. Oligopoly involves few producers, which means more than one producer as it is in pure monopoly but not so many as in monopolistic competition or pure competition where it is difficult to follow rival firms’ actions. Therefore, due to small number of producers on oligopoly market, the price and output solutions are interdependent. As a result, firms can cooperate or come to an agreement profitable for everyone. Therefore, they can increase, as it is possible, their joint profits (Pleeter & Way, 1990, p.129). Further, oligopoly is divided on pure, which is producing homogeneous products, and differentiated, producing heterogeneous products (Gallaway, 2000). Economists Farris and Happel insist that the more the product is differentiated, the more firms become independent, and the more the product differentiation, “the less likely joint profit maximization exists for the entire group” (1987, p. 263). Consequently, it is worth to be interdependent.
This separation between ownership and managerial control in this instance can be problematic as the principal and the agents have different interests and goals. In a large publicly traded corporation such as NOL/APL, shareholders (principals) lack direct control when the CEOs (agents) make decisions t...
Philip M. Parker and Lars-Hendrik Röller. (1997). Collusive Conduct in Duopolies: Multimarket Contact and Cross-Ownership in the Mobile Telephone Industry. The RAND Journal of Economics. Vol. 28 (2), pp. 304-322
Rumelt, R.P., “How Much Does Industry Matter?” Strategic Management Journal 12 (1991): 167–185. See also Mauri, A. J., Mauri & Michaels, M.P., “Firm and Industry Effects Within Strategic Management: An Empirical Examination,” Strategic Management Journal 19 (1998): 211–219
Each party plays his parts – Role of key players like owners, Board of directors and staffs
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
The strategic alliance approached by selling Mazda’s 25% share to Ford motor company. So it was a strategic alliance and shared ownership type. Shared ownership alliance is actually one special form of joint venture.
There are three premises of corporate strategy, which any successful corporate strategy is built on a number of premises. The first premise is competition occurs on the business unit level, which diversified companies do not compete, only their business units do. The second premise is diversification inevitably adds costs