COMPPOL
New Developments in Competition Policy
| Coordinatore | UNIVERSITEIT VAN AMSTERDAM
Organization address
address: SPUI 21 contact info |
| Nazionalità Coordinatore | Netherlands [NL] |
| Totale costo | 177˙340 € |
| EC contributo | 177˙340 € |
| Programma | FP7-PEOPLE
Specific programme "People" implementing the Seventh Framework Programme of the European Community for research, technological development and demonstration activities (2007 to 2013) |
| Code Call | FP7-PEOPLE-2010-IEF |
| Funding Scheme | MC-IEF |
| Anno di inizio | 2011 |
| Periodo (anno-mese-giorno) | 2011-09-01 - 2013-08-31 |
Partecipanti
| # | ||||
|---|---|---|---|---|
| 1 |
UNIVERSITEIT VAN AMSTERDAM
Organization address
address: SPUI 21 contact info |
NL (AMSTERDAM) | coordinator | 177˙340.80 |
Mappa
Word cloud
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Obiettivo del progetto (Objective)
'My goal is to shed light on the competition implications of two recent much-talked about developments in business, namely the surge of new financial derivatives and the high bonuses paid out to CEOs. First, there has been a rapid expansion of financial markets in the last decade and the therein used instruments, so-called financial derivatives. These products are generally not publicly exchanged on a market, which makes it hard to know how much they are used. But it is, for example, estimated that derivatives consist of between 20% and 40% of the total daily value traded on the London Stock Exchange. This same opaqueness of financial derivatives –apart from having likely been one of the causes of the current economic difficulties- has created a new array of tools for firms to change the rules of the game into anti-competitive, yet hard to detect ways. For example, a firm can buy a contract such that it benefits from a rival’s share price to decrease, which is a credible commitment to behave aggressively against that rival. Second, the use of large bonuses for managers has received a lot of criticisms in the press lately. But it has been largely neglected in economic research that these bonuses may also affect how managers, and the firms they lead, compete. It may occur, for example, that bonuses may motivate managers to collude with their competitors. It is perhaps time to more deeply explore how bonuses -and more in general the design of contracts in the firm- may affect managers’ decisions to infringe competition laws. In my project, I shall study the competitive effects of widely used financial derivatives and executive bonuses, and I will do this both from a theoretical and empirical perspective.'
Introduzione (Teaser)
The main institutional investors of the world and their portfolios can play an important role on product markets. If their portfolios are large, so that they own shares in most of the important firms in an industry, then they gain power in that market.
Descrizione progetto (Article)
Leading institutional investment firms have shares in many European companies at once. This concept was the key factor for exploring the extent of common ownership created by institutional investors for publicly traded corporations in Europe.
This research project, 'New developments in competition policy' (COMPPOL), explored the place where the lines in this network cross. Today's investors operate in an increasingly complex landscape. Judging the potential for market power in an industry can be difficult. Mergers and acquisitions (M&As) are obvious forms of potential conflict for decreasing competitiveness and there is already policy that addresses M&A issues.
Researchers in this EU-funded project showed that industries with a higher percentage of common ownership networks within the same industry have higher mark-ups. This supports the idea that big portfolios of large investors could lead to industry outcomes that are anti-competitive.
The researchers recommend that EU authorities review common ownership structures while assessing European industries for market power. Identifying problems here will send authorities in the right direction to monitor and protect competition in EU markets.