Speaker:
Charles Wang
Harvard Business School
Discussant:
Vicente Cuñat
London School of Economics
Abstract
Paper Authors: Akash Chattopadhyay, Matthew D. Shaffer, Charles C.Y. Wang
After decades of both de-prioritizing shareholders economic interests and low corporate prof itability, Japan introduced the JPX400 in 2014. The index highlighted the countrys best-run companies by annually selecting the 400 most pro table among Japans large and liquid rms. Index-inclusion incentives led rms to increase ROE proportionally by 41%, though rms did not realize signi cant capital-market or product-market bene ts from inclusion. Status incentives contributed to the observed performance improvement. Back-of-the-envelope estimates suggest that JPX400-inclusion incentives accounted for 16% (20%) of the growth in aggregate earn ings (market capitalization) over our sample period. Stock indexes can transform longstanding behavior via non-pecuniary channels.
