Does Joining the S&P 500 Index Hurt Firms?

Does Joining the S&P 500 Index Hurt Firms?

Benjamin Bennett, René Stulz, Zexi Wang

Series number :

Serial Number: 

Date posted :

July 30 2020

Last revised :

July 30 2020
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  • S&P 500 index additions • 
  • Stock performance • 
  • indexing • 
  • investment • 
  • governance • 
  • passive investing • 
  • share repurchases • 
  • Stock price informativeness

We investigate the impact on firms of joining the S&P 500 index from 1997 to 2017. We find that the positive announcement effect on the stock price of index inclusion has disappeared and the long-run impact of index inclusion has become negative. Inclusion worsens stock price informativeness and some aspects of governance.

Compensation, investment, and financial policies change with index inclusion. For instance, payout policies of firms joining the index become more similar to the policies of their index peers. ROA falls following inclusion. There is no evidence of an impact of inclusion on competition.


Real name:
Benjamin Bennett
Real name:
Zexi Wang