Common ownership of companies can be beneficial

Common ownership of companies can be beneficial


POINT OF VIEW

Since companies in multiple industries are now owned by only a few mutual fund families. They might have fewer incentives to lower prices, invest in new products and win marketshare from competitors if they know that their large shareholders also own significant stakes in their rivals.

Holly Yang

Associate Professor of Accounting


In brief

  • A firm's investment to price sensitivity increases with their level of cross-ownership. In addition, cross-ownership helps facilitate organizational learning when managers revise their earnings forecast. 
  • A manager may have more firm-specific information but less industry-level information. By investing in multiple peer-firms in the same industry, institutions may have information on product demand from the market or strategic issues related to the firms competitors. As a result they are likely to have a better understanding of industry trends and the overall competing landscape.
  • A lot of the recent debate on cross-ownership revolves around anti-trust issues. However, it may be premature to say that cross-ownership is not beneficial to society as there are some benefits to cross-ownership that have not explored yet.

Associate Professor Holly Yang from SMU’s School of Accountancy has researched on the role of individual managers in corporate disclosure and determinants of firms’ voluntary disclosure decisions. In this podcast, she discusses how cross-ownership of industry peers helps institutional investors acquire deeper industry insights and enhanced private information, which is incorporated by managers in their investment decisions.

Associate Professor of Accounting Holly Yang from SMU’s School of Accountancy has researched on the role of individual managers in corporate disclosure and determinants of firms’ voluntary disclosure decisions. Together with co-author Associate Prof Young Jun Cho, she is currently working on publishing a paper on Institutional Cross Ownership of Peer Firms and Investment Sensitivity to Stock Price.

In this podcast, she discuss how cross-ownership of industry peers helps institutional investors better acquire industry insights and produce private information, thus allowing managers to incorporate this information in their investment decisions.

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Originally published at https://news.smu.edu.sg/news/2019/09/18/common-ownership-companies-can-be-beneficial.


Inside the mind of

Holly Yang is currently the Co-Director of the School of Accountancy Research Centre and an Associate Professor of Accounting at Singapore Management University. She completed her graduate studies at Cornell University and taught at the Wharton School of the University of Pennsylvania prior to joining SMU. Her research focuses on the role of individual managers in corporate disclosure and determinants and consequences of firms’ voluntary disclosure decisions. She has published in the Journal of Accounting and Economics, The Accounting Review, Review of Accounting Studies, Management Science, and Contemporary Accounting Research. She has taught courses on introductory and intermediate accounting at the University of Michigan, Cornell University, and the Wharton School. She currently teaches Accounting Thought and Governance and Financial Reporting in an IFRS World at SMU.