Prof. Roni Michaely’s research paper, “Are U.S. Industries Becoming More Concentrated?” had been accepted for publication at the Review of Finance.
This paper attracted significant attention and has been featured in the in the New York Times, The Economist, Wall Street Journal, Financial Times, Bloomberg and other news outlets; and received more than 4,000 downloads in SSRN.
Since the late 1990s, over 75% of U.S. industries have experienced an increase in concentration levels. We find that firms in industries with the largest increases in product market concentration show higher profit margins and more profitable mergers and acquisitions deals. At the same time, we find no evidence for a significant increase in operational efficiency. Taken together, our results suggest that market power is becoming an important source of value. These findings are robust to the inclusion of (i) private firms; (ii) factors accounting for foreign competition; and (iii), the use of alternative measures of concentration. We also show that the higher profit margins associated with an increase in concentration are reflected in higher returns to shareholders. Overall, our results suggest that the U.S. product markets have undergone a shift that has potentially weakened competition across the majority of industries.
link to the paper