The Impact of Passive Investing on Corporate Valuations

Belasco, Eric J.; Finke, Michael; Nanigian, David

doi:10.2139/ssrn.1769220

Cited by 1 publication

(1 citation statement)

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“…83 A similar concern has been raised with regard to index funds, which also trade rarely. 84 However, so long as any significant portion of a company's shares are owned and traded by individual or institutional shareholders outside the Fund, market prices are likely to remain at least somewhat informationally efficient. Moreover, it can be argued that the benefits associated with marginal increases in informational efficiency are small.…”

Section: Reduced Informational Efficiency In Stock Pricingmentioning

confidence: 99%

Corporate Governance as Privately-Ordered Public Policy: A Proposal

Stout¹,

Gramitto²

2017

Preprint

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In this Article, we show how our society can use corporate governance shifts to address, if not entirely resolve, a number of currently pressing social and economic problems. These problems include: rising income inequality; demographic disparities in wealth and equity ownership; increasing poverty and income insecurity; a need for greater innovation and investment in solving problems like disease and climate change; the “externalization” of many costs of corporate activity onto third parties such as customers, employees, creditors, and the broader society; the corrosive influence of corporate money in politics; and discontent and loss of trust in the capitalist system among a large and growing segment of the population.We demonstrate how, to a very significant extent, these problems can be traced to the way shares in business corporations are currently owned, traded, and voted. We also offer a plausible plan for shifting the structure of share ownership, trading, and voting to create a more democratic and sustainable capitalism that allows business corporations to better serve humanity. Our proposal, which envisions developing a new form of institutional shareholder, does not rely either on market forces or government interventions. Rather, it relies on voluntary cooperation and the private ordering of free individuals using modern information technologies. It operates to reduce inequalities not only in wealth and income but also in influence over business corporations.

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Section: Reduced Informational Efficiency In Stock Pricingmentioning

confidence: 99%