NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Does Joining the S&P 500 Index Hurt Firms?

Benjamin Bennett, René M. Stulz, Zexi Wang

NBER Working Paper No. 27593
Issued in July 2020
NBER Program(s):Corporate Finance

We investigate the impact on firms of joining the S&P 500 index from 1997 to 2017. We find that the positive announcement effect on the stock price of index inclusion has disappeared and the long-run impact of index inclusion has become negative. Inclusion worsens stock price informativeness and some aspects of governance. Compensation, investment, and financial policies change with index inclusion. For instance, payout policies of firms joining the index become more similar to the policies of their index peers. ROA falls following inclusion. There is no evidence of an impact of inclusion on competition.

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Document Object Identifier (DOI): 10.3386/w27593

 
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