Schulich Professor’s Research Wins European Finance Association Award

FACULTY RESEARCH IMPACTS

Yelena Larkin

In August 2020, Yelena Larkin received a prestigious Pagano-Zechner award for the best non-investments paper published in the Review of Finance journal in 2019–2020.

The paper, “Are US Industries Becoming More Concentrated?”, is a joint work with Gustavo Grullon from Rice University and Roni Michaely from the University of Hong Kong. The paper demonstrates that despite popular belief, U.S. markets have become more concentrated over the past two decades. Firms that operate in industries with the largest increase in concentration enjoy wider profit margins, close more profitable M&A deals, and experience better stock returns. Taken together, the results indicate that product markets have undergone a structural shift that has potentially weakened competition.

Larkin’s ongoing agenda continues investigating the outcomes of product market consolidation. Combined with other evidence, the increase in concentration and higher profit margins, enjoyed primarily by the shareholders, are an alarming sign and are unlikely to be an indicator of overall economic improvement. “Today we live in a world in which a handful of ‘superstar firms’ have grown to dominate their industries,” said Larkin. “Importantly, this is not a purely high-tech phenomenon: the increase in concentration affects around threequarters of the US industries.” She believes that the outbreak of COVID-19 has only exacerbated the trend, leading to attrition of small businesses, while simultaneously increasing the dominance of large corporations. “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.

In 2021, Larkin was invited as an expert witness to present the results of her work in front of the House of Commons Standing Committee on Industry, Science and Technology.

Larkin is currently working on extending this research into multiple directions. First, she is looking at a link between product market competition and CSR. Consumer demand for green products is considered particularly impactful in competitive product markets. However, in the most polluting industries, consumers cannot differentiate across products, making the channel ineffective. Larkin is studying whether competition can still improve environmental policy absent consumer differentiation. Second, she is studying the implications of concentration on innovation activity. She is attempting to answer this question by looking at the labour market and innovator productivity.

Finally, Larkin is expanding the study of product market concentration beyond U.S. markets and examining whether the recent U.S. productmarket consolidation is echoed in the Canadian economic environment. She finds that Canadian stock markets have become more consolidated, as the number of publicly traded firms on TSX has declined, but their size has grown bigger. In 2021, Larkin was invited as an expert witness to present the results of her work in front of the House of Commons Standing Committee on Industry, Science and Technology. This study has also been featured in the Competition Bureau Canada 2021 Competition and Growth Summit discussions and covered by leading media outlets, including The Globe and Mail and Globe Newswire.

ABOUT THE EUROPEAN FINANCE ASSOCIATION

The European Finance Association (EFA) was created in 1974 under the auspices of the European Foundation for Management Development (EFMD) and in close cooperation with the European Institute for Advanced Studies in Management (EIASM) to foster an international professional society for academics, practitioners, and doctoral students in the greater field of Finance, who are interested in research areas such as financial management and financial theory along with their applications to exchange of ideas, expertise, news and knowledge in Finance at the international level.