Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy / Lucian A. Bebchuk, Scott Hirst.

Format:

Book

Author/Creator:

Bebchuk, Lucian A.

Contributor:

National Bureau of Economic Research.

Hirst, Scott.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26543.

NBER working paper series no. w26543

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Index Funds and the Future of Corporate Governance

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

We seek to contribute to understanding index fund stewardship by providing a comprehensive theoretical, empirical, and policy analysis of such stewardship. We put forward an agency-cost theory of the stewardship decisions that index fund managers make. Our agency-costs analysis shows that index fund managers have strong incentives to (i) underinvest in stewardship and (ii) defer excessively to the preferences and positions of corporate managers. We also undertake an empirical analysis of the full range of stewardship activities that index funds do and do not undertake. We show that the body of evidence is, on the whole, consistent with the incentive issues identified by our agency-costs framework. Finally, we explain how our analysis should reorient important ongoing debates regarding common ownership and hedge fund activism.

Notes:

Print version record

December 2019.