The benchmark inclusion subsidy

نویسندگان

چکیده

We argue that the pervasive practice of evaluating portfolio managers relative to a benchmark has real effects. Benchmarking generates additional, inelastic demand for assets inside benchmark. This leads “benchmark inclusion subsidy:” firm values an investment project more than one outside. The same wedge arises valuing M&A, spinoffs, and IPOs. overturns proposition investment’s value is independent entity considering it. describe characteristics determine subsidy, quantify its size (which could be large), identify empirical work supporting our model’s predictions.

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ژورنال

عنوان ژورنال: Journal of Financial Economics

سال: 2021

ISSN: ['1879-2774', '0304-405X']

DOI: https://doi.org/10.1016/j.jfineco.2021.04.021