How Institutional Investors’ Ownership Concentration Affects Corporate Governance

Over the past few decades, the ownership of public corporations has been turned on its head. While private individuals owned approximately two-thirds of U.S. equities in 1970, today it is institutional investors like Blackrock, Vanguard, and State Street that control two-thirds of such shares. This increase in institutional assets, often referred to as fiduciary capitalism or mutual fund capitalism, came with the rise of pension funds and mutual funds. More recently, the popularity of Exchange Traded Funds (ETFs) has shifted assets from active to passive investment strategies. In a recent paper, available here, I explain how these changes in … Read more