Publications
Publications
- March 2020
- Journal of Financial Economics
Governance Through Shame and Aspiration: Index Creation and Corporate Behavior
By: Akash Chattopadhyay, Matthew D. Shaffer and Charles C.Y. Wang
Abstract
After decades of deprioritizing shareholders' economic interests and low corporate profitability, Japan introduced the JPX-Nikkei400 in 2014. The index highlighted the country's "best-run" companies by annually selecting the 400 most profitable of its large and liquid firms. We find that managers competed for inclusion in the index by significantly increasing ROE, and they did so at least in part due to their reputational or status concerns. The ROE increase was predominantly driven by improvements in margins, which were in turn partially driven by cutting R&D intensity. Our findings suggest that indexes can affect managerial behavior through reputational or status incentives.
Keywords
JPX-Nikkei 400 Index; Status Incentives; Return On Equity; Capital Efficiency; Social Norms; Index Inclusion; Reputation Incentives; Motivation and Incentives; Corporate Governance; Behavior; Investment Return; Status and Position; Japan
Citation
Chattopadhyay, Akash, Matthew D. Shaffer, and Charles C.Y. Wang. "Governance Through Shame and Aspiration: Index Creation and Corporate Behavior." Journal of Financial Economics 135, no. 3 (March 2020): 704–724.