A Schulich professor’s research on concentrated U.S. product markets recently won the Pagano & Zechner Prize for the best non-Investments paper published in the Review of Finance journal in 2019-20. Yelena Larkin has received the award for her work “Are US Industries Becoming More Concentrated?” on behalf of her co-authors at the European Finance Association 2020 annual meeting.
“Today we live in a world in which a handful of ‘superstar firms’ have grown to dominate their industries. Importantly, this is not a purely high-tech phenomenon: the increase in concentration affects around three-quarters of the U.S. industries,” said Larkin.
“The COVID outbreak has only exacerbated the trend. While many smaller businesses have closed their doors potentially forever, Apple has reached a new high of $2 trillion market cap. Currently, just five companies – Amazon, Apple, Facebook, Netflix and Google parent Alphabet – make up about a quarter of the S&P 500’s value and 50 per cent of the NASDAQ’s value.”
Larkin believes further research needs to be done. The rise in concentration is linked to higher profits, which, in turn, are transferred to shareholders in the form of high stock returns. Combined with other evidence, it is difficult to think of a scenario under which the increase in concentration and higher profit margins, enjoyed primarily by the shareholders, represents an overall economic improvement.
“This award proves the profession finds my research relevant and impactful. It is precious to know that my excitement and faith in the main message of this research work are recognized and shared by others,” Larkin said.