Direct link: https://www.nber.org/system/files/working_papers/w29365/w29365.pdf
Abstract:
While major stock market indices are followed by large monetary investments, we document that membership decisions for the S&P 500 index have a nontrivial amount of discretion. We show that firms’ purchases of S&P ratings appear to improve their chance of entering the index (but purchases of Moody’s ratings do not). Furthermore, firms tend to purchase more S&P ratings when there are openings in the index membership. Such a pattern is also confirmed by an event study that explores a rule change on index membership in 2002. Finally, discretionary additions exhibit subsequent deterioration in financial performance relative to rule-based additions.
Bloomberg article (for those who don't want to read the paper): S&P 500 Membership May Be ‘For Sale,’ New NBER Research Suggests
Submitted October 12, 2021 at 10:14AM by Not_FinancialAdvice https://ift.tt/2X5hd2J