Private Law Theory

ABSTRACT
We develop a model in which common owners of firms in the same industry may appoint a common director to benefit from information-sharing between firms with similar products. Information sharing through common directors increases the likelihood of product success but also reduces profits due to heightened competition. Empirically, we find that active, long-term common owners with sizable stakes – especially in the pharmaceutical industry – are more likely to appoint common directors. Consistent with the model, such appointments are associated with increased product similarity and broader firm scope, suggesting higher success rates, but are also followed by lower markups and diminished innovation. Our findings suggest an active channel linking common ownership to firm strategy.

Eldar, Ofer and Nili, Yaron and Xu, Yingze, Common Ownership Directors (June 15, 2025), Duke Law School Public Law & Legal Theory Series No 2025-27; UC Berkeley Public Law Research Paper Forthcoming.