Keeping Up with the Joneses and the Real Effects of S&P 500 Inclusion

Benjamin Bennett, Rene M. Stulz and Zexi Wang
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Benjamin Bennett: Tulane U
Rene M. Stulz: Ohio State U and ECGI
Zexi Wang: Lancaster U

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Firms added to the S&P 500 index join a prestigious and exclusive club. They want to fit in the club, which creates a "keeping up with the Joneses" effect. Firms pay more attention to their index peers after inclusion and their investment, external financing, and payouts co-move more with their index peers. These effects do not appear to result from the increased coordination among investors posited by the common ownership literature as inclusion does not cause a decrease in competition. Since index inclusion does not increase shareholder wealth permanently, these peer effects do not appear to benefit shareholders.

JEL-codes: G11 G14 G23 G31 G32 G35 (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2021-07

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