Academic Events

Maurizio Iacopetta

SKEMA Business School and OFCE Sciences Po Paris

This paper studies the macroeconomic consequences of common ownership in a growth model with industry dynamics. Common ownership occurs when financial investors hold stakes in companies that compete in the product market. The paper integrates three widely debated mechanisms through which common ownership affects corporate decisions: corporate governance, business stealing, and industry knowledge spillovers. It examines how these mechanisms influence product quality, firm entry, and firm size, and explores their aggregate consequences.

In an economy with common ownership, the typical firm is less inclined to invest in quality expansion compared to an economy without common ownership, as the firm's majority shareholder holds stakes in rival firms. The dynamic interaction between common ownership, firm size, entry, and quality expansion gives rise to hump-shaped investment patterns.

Quantitative analysis, calibrated to the U.S. economy, suggests that an increase in common ownership---measured by the magnitude assessed by Azar and Vives (2021) for the U.S. between 1985 and 2015---leads to a 1.76% decline in the quality of corporate governance. It also results in a long-run decrease in corporate investment relative to GDP by 0.09%, and a long-run decline in the economy's rate of growth by 0.046%. Although, in the short run, the payout-to-GDP ratio increases by 0.35%, it declines by 0.21% in the long run.

The paper also studies the welfare consequences of these developments.

Keywords: Common Ownership, Industry Dynamics, Agency Problems, Internal Investments, Quantitative Analysis

JEL Codes: O31, O33, C63, L22, G34

Maurizio Iacopetta is currently a Professor of Economics at SKEMA Business School and a Senior Economist at OFCE Sciences Po in Paris, France. He has previously held positions at the Georgia Institute of Technology (USA), CIDE (Mexico), and LUISS (Italy). He holds a Ph.D. in Economics from New York University.

Iacopetta’s research focuses on economic growth, the economics of innovation, and quantitative macroeconomics. His most recent work explores the consequences of poor corporate governance on economic growth. His latest research has been published in the Economic Journal, European Economic Review, and Journal of Economic Dynamics and Control.