We examine the governance role of delegated portfolio managers. In our model, investors allocate their wealth between passive funds, active funds, and private savings, and fund fees are endogenously determined. Funds' ownership stakes and fees determine funds' incentives to engage in governance.
Whether passive fund growth improves governance depends on whether it crowds out private savings or active funds. In the former case, it improves governance even though it is accompanied by lower fees, whereas in the latter case it can harm governance. Overall, passive fund growth improves governance only if it does not increase fund investors' returns too much.
Using natural language processing, we identify and categorize the corporate goals in the shareholder letters of the 150 largest companies in the United...
A common argument against divestment is that it jettisons voting power and that it has a small effect on stock prices. We argue that divestment is a form of...
Corporate governance may be on the verge of entering a new stage. After the managerialism that dominated the view of the corporation into the 1970s and the...