The Role of Index Funds in Promoting Sustainable Corporate Governance : a review of theory and evidence of the stewardship efforts of the Big Three
Secomandi, Mikael (2021)
Secomandi, Mikael
2021
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-202201221579
https://urn.fi/URN:NBN:fi:amk-202201221579
Tiivistelmä
The rise of index funds over the last two decades has attracted significant attention due to their large accumulated market shares and prominent shareholder power. As the largest index fund providers in the world, the Big Three are seen by many to have a fiduciary duty to use this power to promote sustainable corporate governance in their portfolio companies. However, it is unclear whether the Big Three have incentives or capabilities to do so. Despite various academic studies contributing to this question, the divisiveness of the results does not suggest conclusive answers. Therefore, this research aims to address the questions of whether the Big Three have incentives to act as forceful stewards and how do the Big Three demonstrate this in practice.
A qualitative research method was chosen in the form of an extensive literature review of the current academic literature and reports. The research questions are answered by a review of theory and incentives, and by a review of empirical evidence. The review of theories and incentives shows a dichotomy of valid incentives for and against active stewardship efforts on behalf of the Big Three, thus providing no conclusive answers. The review of current empirical evidence suggests a somewhat weak demonstration of forceful stewardship by the Big Three. Despite some signs of improvement that could warrant optimistic hopes for the future, the reviewed literature suggests that the stewardship efforts of the Big Three are more in accordance with the agency-costs view than the value-maximisation view.
A qualitative research method was chosen in the form of an extensive literature review of the current academic literature and reports. The research questions are answered by a review of theory and incentives, and by a review of empirical evidence. The review of theories and incentives shows a dichotomy of valid incentives for and against active stewardship efforts on behalf of the Big Three, thus providing no conclusive answers. The review of current empirical evidence suggests a somewhat weak demonstration of forceful stewardship by the Big Three. Despite some signs of improvement that could warrant optimistic hopes for the future, the reviewed literature suggests that the stewardship efforts of the Big Three are more in accordance with the agency-costs view than the value-maximisation view.