Heath, Davidson; Macciocchi, Daniele; Michaely, Roni; … - 2019 - This draft: April 23, 2019
Passively managed index funds now hold over 30% of U.S. equity fund assets; this shift raises fundamental questions … about monitoring and governance. We show that, relative to active funds, index funds are less effective monitors: (a) they … portfolio companies. Overall, the rise of index funds decreases the alignment of incentives between beneficial owners and firm …