TY  - JOUR
AU  - Friedman,Benjamin M.
TI  - Economic Implications of Changing Share Ownership
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5141
PY  - 1996
Y2  - October 1996
UR  - http://www.nber.org/papers/w5141
L1  - http://www.nber.org/papers/w5141.pdf
N1  - Author contact info:
Benjamin M. Friedman
Department of Economics
Littauer Center 127
Harvard University
Cambridge, MA  02138
Tel: 617/495-4246
Fax: 617/495-7730
E-Mail: bfriedman@harvard.edu
AB  - Institutional investors, including especially pension funds and mutual funds, are steadily replacing individuals as owners of equity shares in the United States.  Forty years ago individual investors owned 90% of all equity shares outstanding.  Today the individually owned share is just 50%. The arguments and evidence surveyed in this paper suggest four ways in which this shift in share ownership could affect the functioning of the equity market: (1) Increasing institutional ownership could either enhance or impair the market's ability to provide equity financing for emerging growth companies.  (2) Increasing institutional ownership, especially in the form of open-end mutual funds, has probably increased the market's volatility in the context of occasional large price movements.  (3) The increasing prevalence of defined contribution (as opposed to defined benefit) pension plans, and especially of 401-k plans, has probably resulted in an increased market price of risk.  (4) Increasing institutional ownership has facilitated a greater role for shareholders in the governance of U.S. corporate business, and correspondingly reduced the independence of corporate managements.
ER  -