We derive a measure that captures the extent to which common ownership shifts managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio.
Empirically, we show that potential drivers of common ownership, including mergers in the asset management industry and, under certain circumstances, even indexing, could diminish managerial motives to internalize externalities. Our findings illustrate the importance of accounting for investor inattention when analyzing whether the growth of common ownership affects managerial incentives.
Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture...
The paper proposes a framework for judicial review of board decisions that have been augmented by an AI. It starts from the assumption that the law treats...
The E.U. Takeover Directive was passed twenty years ago with the main aim of fostering a single European takeover market. However, subsequent economic,...