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Home > Patrick Boyle On Finance > Do Companies Pay For S&P Index Membership?


	Podcast:		Patrick Boyle On Finance
	Episode:		Do Companies Pay For S&P Index Membership?
	Category:		Business
	Duration:		00:15:21
	Publish Date:		2021-10-26 23:00:00
	Description:		Do Companies Buy S&P500 Membership? A new working paper attempts to figure out why some companies make it into the blue-chip stock market index. In recent years there has been a huge shift away from active asset management and towards passive, index-tracking funds. The indices that these funds follow have in turn gained enormous power, becoming gatekeepers to the flow of trillions of dollars. Names like S&P Dow Jones, FTSE Russell and MSCI are the biggest index providers and earn huge revenues from charging funds licensing fees. But a new scandal questions the integrity of Standard & Poor’s - the provider of one of the most tracked indices. A working paper recently published by the National Bureau of Economic Research found that companies that bought credit ratings from S&P Global’s rating business were statistically more likely to be included in the S&P 500. S&P argues that the paper, which has not been peer-reviewed, is “flawed” and misleading about the index’s eligibility rules and methodology. S&P also insists that it has a strict separation of business lines. To be sure, some of the paper’s claims may seem overdone, given that S&P is a major player in both the credit rating and index-provision business. A company may naturally seek a credit rating to assist in its expansion efforts that would in any case propel it into the index. Patrick's Books: Statistics For The Trading Floor: https://amzn.to/3eerLA0 Derivatives For The Trading Floor: https://amzn.to/3cjsyPF Corporate Finance: https://amzn.to/3fn3rvC Patreon Page: https://www.patreon.com/PatrickBoyleOnFinance Visit our website: www.onfinance.org Follow Patrick on Twitter Here: https://twitter.com/PatrickEBoyle Patrick Boyle On Finance - YouTube Support the show (https://www.patreon.com/PatrickBoyleOnFinance)
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