Language:

Hidden power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk

Business and politics, 2017-06, Vol.19 (2), p.298-326 [Peer Reviewed Journal]

Copyright © V.K. Aggarwal 2017 and published under exclusive license to Cambridge University Press ;Copyright © V.K. Aggarwal 2017 and published under exclusive license to Cambridge University Press This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited. ;ISSN: 1469-3569 ;EISSN: 1469-3569 ;DOI: 10.1017/bap.2017.6

Full text available

Citations Cited by

Actions
1. Add to My Research
2. Remove from My Research
3. E-mail
4. Print
5. Permalink
6. Citation
7. EasyBib
8. EndNote
9. RefWorks
10. Delicious
11. Export RIS
12. Export BibTeX

Title:
Hidden power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk
Author: Fichtner, Jan ; Heemskerk, Eelke M. ; Garcia-Bernardo, Javier
Subjects: 20th century ; Asset management ; Capitalism ; Companies ; Corporate governance ; Economic crisis ; Elections ; Governance ; Hedge funds ; Incentives ; Index funds ; Institutional investments ; Internalization ; International finance ; Investment advisors ; Investments ; Investors ; Market shares ; Mutual funds ; Ownership ; Power ; Prone ; Risk ; Shareholder activism ; Stock exchanges ; Stockholders ; Strategic voting ; Voting rights
Is Part Of: Business and politics, 2017-06, Vol.19 (2), p.298-326
Description: Since 2008, a massive shift has occurred from active toward passive investment strategies. The passive index fund industry is dominated by BlackRock, Vanguard, and State Street, which we call the “Big Three.” We comprehensively map the ownership of the Big Three in the United States and find that together they constitute the largest shareholder in 88 percent of the S&P 500 firms. In contrast to active funds, the Big Three hold relatively illiquid and permanent ownership positions. This has led to opposing views on incentives and possibilities to actively exert shareholder power. Some argue passive investors have little shareholder power because they cannot “exit,” while others point out this gives them stronger incentives to actively influence corporations. Through an analysis of proxy vote records we find that the Big Three do utilize coordinated voting strategies and hence follow a centralized corporate governance strategy. However, they generally vote with management, except at director (re-)elections. Moreover, the Big Three may exert “hidden power” through two channels: First, via private engagements with management of invested companies; and second, because company executives could be prone to internalizing the objectives of the Big Three. We discuss how this development entails new forms of financial risk.
Publisher: Cambridge, UK: Cambridge University Press
Language: English
Identifier: ISSN: 1469-3569
EISSN: 1469-3569
DOI: 10.1017/bap.2017.6
Source: ProQuest Central

Back to results list


INSPIRE LIBRARY - TON DUC THANG UNIVERSITY	(84-028) 37 755 057	Feedback
19 Nguyen Huu Tho St. Dist.7, HCM	thuvien@tdtu.edu.vn	Feedback

Hidden power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk

Searching Remote Databases, Please Wait