Passively managed index funds now hold over 30% of U.S. equity fund assets; this shift raises fundamental questions about monitoring and governance.
We show that, relative to active funds, index funds are less effective monitors: (a) they are less likely to vote against firm management on contentious governance issues; (b) there is no evidence they engage effectively publicly or privately; and (c) they promote less board independence and worse pay-performance sensitivity at their portfolio companies. Overall, the rise of index funds decreases the alignment of incentives between beneficial owners and firm management and shifts control from investors to managers.
The E.U. Takeover Directive was passed twenty years ago with the main aim of fostering a single European takeover market. However, subsequent economic,...
We analyze the impact of a large shareholder disclosing its voting decisions prior to shareholder meetings on final vote outcomes for management and...
In a canonical takeover model we let an informed large shareholder choose between making a bid or initiating a sale to another acquirer. Such takeover...