Columbia Law School
Sky Blog
Good morning. This is an open meeting of the U.S. Securities and Exchange Commission on January 8, 2020, under the Government in the Sunshine Act. The Commission today will consider a staff recommendation to issue for public comment a Proposed
institutional investors
The Case for Institutional Investors’ Collective Engagements
Shareholder cooperation is on the rise as a tool for active corporate ownership and a way to effectively voice concerns about corporate governance and performance. While “wolf packs” of activist hedge funds that aim to bring about significant corporate change …
Do Long-Term Institutional Investors Promote CSR Activities?
Institutional investors have in recent years become the largest equity holders in the U.S., owning about 80 percent of the market value of S&P 500 index stocks and more than 70 percent of the shares of the 10 largest U.S. …
The Cost to Retail Investors and Public Markets of “Harmonizing” Securities Offering Exemptions
In June 2019, the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) issued a Concept Release on the Harmonization of Securities Offering Exemptions (the “Concept Release”), which set forth proposals to expand the …
Institutional Shareholders: Friends or Foes of Banks?
Following the financial crisis, regulators, academics, and practitioners investigated the factors that contributed to the systemic failure of the financial system. An important dimension of systemic risk that was identified is the correlated movements in market prices among banks during …
Are Executives Really “Penny Wise and Pound Foolish” About ESG?
Critics of the shareholder-primacy model assert that it is flawed because it encourages managers to adopt a myopic view of profit generation that forgoes necessary investment and creates externalities borne by society. These critics argue that greater attention should be …
Common Ownership Has Not Yet Ushered in an Era of Anticompetitive Behavior
As mutual funds have become popular with individual investors, the institutions that manage these funds have grown dramatically. Along with the benefit of offering individual investors inexpensive portfolio diversification and engagement in corporate governance, there is mounting concern that the …
How Institutional Ownership Affects Insider Trading
Institutional owners have traditionally been thought of as passive investors that have little concern for or influence on corporate policies and decisions. In contrast, recent literature shows that while many institutions are passive in terms of their investment choices and …
Buy-Side Analysts and Earnings Conference Calls
The role of sell-side equity analysts in the capital markets has been researched extensively by academics over the past several decades. In contrast, due to data limitations, there has been little research on buy-side analysts. Buy-side analysts work for institutional …
How Institutional Investors Gain an Information Advantage: Evidence From Option Backdating
Institutional investors are often viewed as informed traders, and individuals attempting to trade in the same market as institutions are likened to “tourists playing poker with professionals in the smoky backroom of a Las Vegas casino.”[1] So how do …
Corporate Governance Consequences of Passive Investing
The popularity of index funds, which automatically track an index of stocks, is continuing to grow in the U.S, and, albeit less intensely, in the EU. Due to the high concentration of the index funds industry, the exponential rise of …
The Case for Doing Nothing About Common Ownership of Competing Firms
One of the hottest antitrust topics of late has been institutional investors’ “common ownership” of minority stakes in competing firms. Writing in the Harvard Law Review, Einer Elhauge proclaimed that “[a]n economic blockbuster has recently been exposed”—namely, “[a] small …
Institutional Investor Voting Behavior: A Network Theory Perspective
It is received wisdom that institutional investors have insufficient incentives to cast informed votes because they compete on relative performance. If BlackRock invests in the monitoring of one of its portfolio companies, it will become relatively less competitive vis-à-vis the …
Wachtell Lipton Offers Thoughts for Boards of Directors in 2018
As 2017 draws to a conclusion and we reflect on the evolution of corporate governance since the turn of the millennium, a recurring question percolating in boardrooms and among shareholders and other stakeholders, academics and politicians is: what’s next on …
Investor Choice in Global Markets for Securities
In a recent paper, we explore how globalization has affected the operation of securities markets and the challenges this poses for their regulation. The paper is part of the first phase of the New Special Study of the Securities …
How Nonvoting Shares Can Help Promote Efficient Corporate Governance
Companies that go public with multiple classes of shares will be excluded from the major U.S. stock indexes of S&P Dow Jones Indices, the organization announced in July. A few days earlier, FTSE Russell said it would bar dual-class companies …
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 …
Do Investors Follow Directors to Other Companies?
In our recent study, we find that institutional investors follow high-performing directors to new firms and make larger initial investments in those firms than in other firms. Fama (1980) and Fama and Jensen (1983) support our finding and propose that …
How Institutional Cross-Ownership Can Improve Corporate Governance
A corporation’s governance structure does not exist in a vacuum: It can impose externalities on other firms. The existing literature has argued that those externalities can arise because companies interact with each other through various types of relationships. For example, …
Common Ownership, Institutional Investors, and Antitrust
One of the most important issues in antitrust at the moment is whether institutional investors’ significant equity holdings in U.S. companies are substantially harming competition in violation of the antitrust laws. In a new article, available here, I conduct …