Olin Business School
Washington University in St. Louis
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130
Tel: (314) 935-7171
Institutional Affiliation: University of Washington in St. Louis
NBER Working Papers and Publications
|March 2019||Who’s Paying Attention? Measuring Common Ownership and Its Impact on Managerial Incentives|
with Erik P. Gilje, Doron Y. Levit: w25644
We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio. Empirically, we show that potential drivers of ownership overlap, including mergers in the asset management industry and the growth of indexing, could in fact diminish managerial motives. Our findings illustrate the importance of accounting for investor inattention and cast doubt on the possibility that the growth of common ownership has had a significant impact on managerial incentives.
|September 2016||Standing on the Shoulders of Giants: The Effect of Passive Investors on Activism|
with Ian R. Appel, Donald B. Keim: w22707
We analyze whether the growing importance of passive investors has influenced the campaigns, tactics, and successes of activists. We find activists are more likely to pursue changes to corporate control or influence (e.g., via board representation) and to forego more incremental changes to corporate policies when a larger share of the target company’s stock is held by passively managed mutual funds. Furthermore, higher passive ownership is associated with increased use of proxy fights and a higher likelihood the activist obtains board representation or the sale of the targeted company. Overall, our findings suggest that the increasingly large ownership stakes of passive institutional investors mitigate free-rider problems associated with certain forms of intervention and ultimately increas...
|October 2011||Ending "Too Big To Fail": Government Promises vs. Investor Perceptions|
with Simon Johnson, Changyong Rhee: w17518
Can a government credibly promise not to bailout firms whose failure would have major negative systemic consequences? Our analysis of Korea's 1997-99 crisis, suggests an answer: No. Despite a general "no bailout" policy during the crisis, the largest Korean corporate groups (chaebol) - facing severe financial and governance problems - could still borrow heavily from households through issuing bonds at prices implying very low expected default risk. The evidence suggests "too big to fail" beliefs were not eliminated by government promises, presumably because investors believed that this policy was not time consistent. Subsequent government handling of potential and actual defaults by Daewoo and Hyundai confirmed the market view that creditors would be protected.
Published: T. A. Gormley & S. Johnson & C. Rhee, 2015. "Ending "Too Big To Fail": Government Promises Versus Investor Perceptions," Review of Finance, vol 19(2), pages 491-518.