We identify a novel economic mechanism through which passive ownership positively affects informational efficiency in the cross-section of firms. Passive investors’ inelastic demand lowers a firm’s cost-of-capital, inducing it to take more risk. The higher cash flow variance, in turn, incentivizes active investors to acquire more precise private information, pushing up price informativeness for firms with high passive ownership. High passive ownership also implies higher stock prices and higher stock-return variances. An increase in the aggregate size of passive investors amplifies these cross-sectional differences. We also document complementarities in firms’ real investment and investors’ information choices that can cause information crashes.

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更多风险，更多信息：被动所有权如何提高信息效率

我们确定了一种新的经济机制，通过这种机制，被动所有权对公司横截面的信息效率产生积极影响。被动投资者缺乏弹性的需求降低了公司的资本成本，导致公司承担更多风险。反过来，较高的现金流差异会激励主动投资者获取更精确的私人信息，从而提高被动所有权高的公司的价格信息量。高被动所有权也意味着更高的股票价格和更高的股票回报差异。被动投资者总规模的增加放大了这些横截面差异。我们还记录了公司实际投资和投资者信息选择中可能导致信息崩溃的互补性。