skip to content
The benchmark inclusion subsidy Preview this item
ClosePreview this item
Checking...

The benchmark inclusion subsidy

Author: A K Kashyap; Natalia Kovrijnykh; Jian Li; Anna Pavlova; National Bureau of Economic Research,
Publisher: Cambridge, Mass. : National Bureau of Economic Research, 2018.
Series: Working paper series (National Bureau of Economic Research), no. 25337.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
We study the impact of evaluating the performance of asset managers relative to a benchmark portfolio on firms’ investment, merger and IPO decisions. We introduce asset managers into an otherwise standard asset pricing model and show that firms that are part of the benchmark are effectively subsidized by the asset managers. This “benchmark inclusion subsidy” arises because asset managers have incentives to hold some  Read more...
Rating:

(not yet rated) 0 with reviews - Be the first.

Subjects
More like this

Find a copy online

Links to this item

Find a copy in the library

&AllPage.SpinnerRetrieving; Finding libraries that hold this item...

Details

Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: A K Kashyap; Natalia Kovrijnykh; Jian Li; Anna Pavlova; National Bureau of Economic Research,
OCLC Number: 1078651087
Notes: "December 2018"
Description: 1 online resource (44 pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), no. 25337.
Responsibility: Anil K. Kashyap, Natalia Kovrijnykh, Jian Li, Anna Pavlova.

Abstract:

We study the impact of evaluating the performance of asset managers relative to a benchmark portfolio on firms’ investment, merger and IPO decisions. We introduce asset managers into an otherwise standard asset pricing model and show that firms that are part of the benchmark are effectively subsidized by the asset managers. This “benchmark inclusion subsidy” arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of the risk characteristics of these firms. Contrary to what is usually taught in corporate finance, we show that the value of an investment project is not governed solely by its own cash-flow risk. Instead, because of the benchmark inclusion subsidy, a firm inside the benchmark would accept some projects that an identical one outside the benchmark would decline. The two types of firms’ incentives to undertake mergers or spinoffs also differ and the presence of the subsidy can alter a decision to take a firm public. We show that the higher the cash-flow risk of an investment, the larger the benchmark inclusion subsidy; the subsidy is zero for safe projects. Benchmarking also leads fundamental firm-level cash-flow correlations to rise. We review a host of empirical evidence that is consistent with the implications of the model.

Reviews

User-contributed reviews
Retrieving GoodReads reviews...
Retrieving DOGObooks reviews...

Tags

Be the first.
Confirm this request

You may have already requested this item. Please select Ok if you would like to proceed with this request anyway.

Linked Data


Primary Entity

<http://www.worldcat.org/oclc/1078651087> # The benchmark inclusion subsidy
    a schema:Book, schema:MediaObject, schema:CreativeWork ;
    library:oclcnum "1078651087" ;
    library:placeOfPublication <http://id.loc.gov/vocabulary/countries/mau> ;
    schema:about <http://experiment.worldcat.org/entity/work/data/6767255989#Topic/asset_liability_management_econometric_models> ; # Asset-liability management--Econometric models
    schema:about <http://experiment.worldcat.org/entity/work/data/6767255989#Topic/portfolio_management_econometric_models> ; # Portfolio management--Econometric models
    schema:about <http://experiment.worldcat.org/entity/work/data/6767255989#Topic/investments_econometric_models> ; # Investments--Econometric models
    schema:author <http://experiment.worldcat.org/entity/work/data/6767255989#Person/kashyap_a_k> ; # A. K. Kashyap
    schema:author <http://experiment.worldcat.org/entity/work/data/6767255989#Person/pavlova_anna_1973> ; # Anna Pavlova
    schema:author <http://experiment.worldcat.org/entity/work/data/6767255989#Person/li_jian> ; # Jian Li
    schema:author <http://experiment.worldcat.org/entity/work/data/6767255989#Person/kovrijnykh_natalia> ; # Natalia Kovrijnykh
    schema:bookFormat schema:EBook ;
    schema:datePublished "2018" ;
    schema:description "We study the impact of evaluating the performance of asset managers relative to a benchmark portfolio on firms’ investment, merger and IPO decisions. We introduce asset managers into an otherwise standard asset pricing model and show that firms that are part of the benchmark are effectively subsidized by the asset managers. This “benchmark inclusion subsidy” arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of the risk characteristics of these firms. Contrary to what is usually taught in corporate finance, we show that the value of an investment project is not governed solely by its own cash-flow risk. Instead, because of the benchmark inclusion subsidy, a firm inside the benchmark would accept some projects that an identical one outside the benchmark would decline. The two types of firms’ incentives to undertake mergers or spinoffs also differ and the presence of the subsidy can alter a decision to take a firm public. We show that the higher the cash-flow risk of an investment, the larger the benchmark inclusion subsidy; the subsidy is zero for safe projects. Benchmarking also leads fundamental firm-level cash-flow correlations to rise. We review a host of empirical evidence that is consistent with the implications of the model."@en ;
    schema:exampleOfWork <http://worldcat.org/entity/work/id/6767255989> ;
    schema:inLanguage "en" ;
    schema:isPartOf <http://experiment.worldcat.org/entity/work/data/6767255989#Series/nber_working_paper_series> ; # NBER working paper series ;
    schema:isPartOf <http://experiment.worldcat.org/entity/work/data/6767255989#Series/working_paper_series_national_bureau_of_economic_research> ; # Working paper series (National Bureau of Economic Research) ;
    schema:name "The benchmark inclusion subsidy"@en ;
    schema:productID "1078651087" ;
    schema:publisher <http://experiment.worldcat.org/entity/work/data/6767255989#Organization/national_bureau_of_economic_research> ; # National Bureau of Economic Research,
    schema:url <http://www.nber.org/papers/w25337> ;
    schema:url <http://www.library.yorku.ca/e/resolver/id/287745212> ;
    wdrs:describedby <http://www.worldcat.org/title/-/oclc/1078651087> ;
    .


Related Entities

<http://experiment.worldcat.org/entity/work/data/6767255989#Organization/national_bureau_of_economic_research> # National Bureau of Economic Research,
    a schema:Organization ;
    schema:name "National Bureau of Economic Research," ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Person/kashyap_a_k> # A. K. Kashyap
    a schema:Person ;
    schema:familyName "Kashyap" ;
    schema:givenName "A. K." ;
    schema:name "A. K. Kashyap" ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Person/kovrijnykh_natalia> # Natalia Kovrijnykh
    a schema:Person ;
    schema:familyName "Kovrijnykh" ;
    schema:givenName "Natalia" ;
    schema:name "Natalia Kovrijnykh" ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Person/pavlova_anna_1973> # Anna Pavlova
    a schema:Person ;
    schema:birthDate "1973" ;
    schema:familyName "Pavlova" ;
    schema:givenName "Anna" ;
    schema:name "Anna Pavlova" ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Series/nber_working_paper_series> # NBER working paper series ;
    a bgn:PublicationSeries ;
    schema:hasPart <http://www.worldcat.org/oclc/1078651087> ; # The benchmark inclusion subsidy
    schema:name "NBER working paper series ;" ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Series/working_paper_series_national_bureau_of_economic_research> # Working paper series (National Bureau of Economic Research) ;
    a bgn:PublicationSeries ;
    schema:hasPart <http://www.worldcat.org/oclc/1078651087> ; # The benchmark inclusion subsidy
    schema:name "Working paper series (National Bureau of Economic Research) ;" ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Topic/asset_liability_management_econometric_models> # Asset-liability management--Econometric models
    a schema:Intangible ;
    schema:name "Asset-liability management--Econometric models"@en ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Topic/investments_econometric_models> # Investments--Econometric models
    a schema:Intangible ;
    schema:name "Investments--Econometric models"@en ;
    .

<http://experiment.worldcat.org/entity/work/data/6767255989#Topic/portfolio_management_econometric_models> # Portfolio management--Econometric models
    a schema:Intangible ;
    schema:name "Portfolio management--Econometric models"@en ;
    .


Content-negotiable representations

Close Window

Please sign in to WorldCat 

Don't have an account? You can easily create a free account.