Passive Investors are Passive Monitors

The Party Structure of Mutual Funds

“…Our overall findings are broadly consistent with a burgeoning literature on the voting behavior of institutional investors (e.g., Matvos and Ostrovsky, 2010;Choi, Fisch, andKahan, 2010, 2013;Ertimur, Ferri, and Oesch, 2013;Iliev and Lowry, 2014;Malenko and Shen, 2016;Appel, Gormley, and Keim, 2016;Brav, Jiang, and Li, 2017;Heath, Macciocchi, Michaeli, and Riggenberg, 2018). McCahery, Sautner, and Starks (2016) survey over 100 large institutional investors to shed light on investors' governance preferences.…”

The New Permanent Universal Owners: Index funds, patient capital, and the distinction between feeble and forceful stewardship

“…We thus aim to contribute to an emerging body of work that tries to understand how global corporate governance is being transformed due to changing investment patterns following the global financial crisis. We do so by providing novel findings on the combined ownership of the Big Three in several European countries and Japan to overcome the predominant focus on the United States in previous work (Appel et al, 2016;Bebchuk & Hirst, 2019;Fichtner et al, 2017;Heath et al, 2019). This new empirical material allows us to establish that indeed the Big Three have become universal owners, reaching well beyond their home market in the United States.…”

“…206-207), the new relations between investors and managers resembled a nonhierarchical network -'formal "principal-agent" relations (…) have given way to negotiated relations between coequals'. Hawley and Williams (2000) have extended the work of Useem by introducing the terms 'universal owners' and 'fiduciary capitalism'. Their argument primarily focused on US public pension funds, such as CalPERS, which had become significant long-term owners in a great number of US listed corporations.…”

“…And that this transformation requires a rethinking of key concepts such as shareholder value, stewardship and patient capital. Our argument is inspired by Hawley and Williams (2000, p. xv) who almost 20 years ago observed that 'a universal owner's cumulative long-term return is determined not merely by the performance of each individual firm it owns, but by the performance of the economy as a whole'. The meaning of shareholder value becomes more and more defined at the level of groups of corporations (such as markets or sectors), instead of at the level of individual firms.…”

The new permanent universal owners: Index funds, patient capital, and the distinction between feeble and forceful stewardship

“…Where we report the combined mean ownership of the Big Three we use both the FS and SE data. (Appel et al, 2016;Fichtner et al, 2017;Heath et al, 2019).…”