The Effect of Institutional Ownership on Firm Transparency and Information Production

Corporate debt maturity and stock price crash risk

“…We focus on dedicated investors because prior research finds that they play an important monitoring role in curbing managerial myopic behaviour (e.g., Bushee, , ). We further include quasi‐indexers because recent evidence suggests that these investors are not passive owners as they hold sway over managers and typically demand greater firm transparency and public information production (e.g., Appel, Gromley, & Keim, ; Boone & White, ). We exclude transient investors from our calculation of LTINST because these investors have shorter‐term horizons and hence fewer incentives to understand and monitor firms (e.g., Andreou et al, ; Chang et al, ).…”

Anticompetitive Effects of Common Ownership

“…To start, we wish to clarify a common confusion by quoting Vanguard's CEO and Chairman William McNabb: “Some have mistakenly assumed that our predominantly passive management style suggests a passive attitude with respect to corporate governance … Nothing could be further from the truth.” Vanguard further explains, “Because our funds own a significant portion of many companies (and in the case of index funds are practically permanent holders of companies), we have a vested interest in ensuring that these companies' governance … practices support the creation of long‐term value for investors.” Recent research confirms that mutual fund families engage much like other investors do, albeit more often “behind the scenes” (Mullins (), Boone and White (), Dimson, Karakaş, and Li (), Appel, Gormley, and Keim (), McCahery, Starks, and Sautner (), Schmidt and Fahlenbrach ()), and sometimes coordinate their activities in “secret summits.” The largely “passive” asset management firms such as BlackRock, Vanguard, and State Street thus play an important role in most corporate governance decisions of publicly traded firms in America, with their power having been compared to that of J.P. Morgan and John D. Rockefeller…”

Governance and Taxes: Evidence from Regression Discontinuity (Retracted)

“…Whereas we use the Russell 1000/2000 threshold to study the tax preferences of institutional investors, other recent papers have used the Russell 1000/2000 threshold to analyze the price effects of index reconstitutions (Chang et al [2015]), the monitoring effects of index portfolio weights (Fich et al [2015]), the market liquidity effects of index reconstitutions (Boone and White [2015]), the institutional ownership impact on payout (Crane et al [2014]), the quantity and quality of corporate disclosures (Bird and Karolyi [2015]), and CEO compensation (Mullins [2014]), as well as the effect of passive investors on governance events (Appel et al [2015]). Crane et al [2014], we find that firms just-added to the Russell 2000 index experience a 10% increase in institutional ownership.…”