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Full-Text Articles in Law
Index Funds And The Future Of Corporate Governance: Theory, Evidence, And Policy, Scott Hirst, Lucian Bebchuk
Index Funds And The Future Of Corporate Governance: Theory, Evidence, And Policy, Scott Hirst, Lucian Bebchuk
Faculty Scholarship
Index funds own an increasingly large proportion of American public companies. The stewardship decisions of index fund managers—how they monitor, vote, and engage with their portfolio companies—can be expected to have a profound impact on the governance and performance of public companies and the economy. Understanding index fund stewardship, and how policymaking can improve it, is thus critical for corporate law scholarship. In this Article we contribute to such understanding by providing a comprehensive theoretical, empirical, and policy analysis of index fund stewardship.
We begin by putting forward an agency-costs theory of index fund incentives. Stewardship decisions by index funds …
The Agency Problems Of Institutional Investors, Scott Hirst, Lucian A. Bebchuk, Alma Cohen
The Agency Problems Of Institutional Investors, Scott Hirst, Lucian A. Bebchuk, Alma Cohen
Faculty Scholarship
We analyze how the rise of institutional investors has transformed the governance landscape. While corporate ownership is now concentrated in the hands of institutional investors that can exercise stewardship of those corporations that would be impossible for dispersed shareholders, the investment managers of these institutional investors have agency problems vis-à-vis their own investors. We develop an analytical framework for examining these agency problems and apply it to study several key types of investment managers.
We analyze how the investment managers of mutual funds - both index funds and actively managed funds - have incentives to under-spend on stewardship and to …