The ability to identify a firm’s shareholders is essential to modern corporate-governance practice. Corporate managers, activist hedge funds, shareholder-proposal sponsors, and other market actors all use this information in their efforts to shape corporate action. They can do so, however, only by dint of regulatory fiat. Since the 1970s, the U.S. Securities and Exchange Commission (SEC) has required institutional investors to disclose their equity holdings every quarter on Form 13F. Today, these disclosures provide the best (and often the only) identifying information about a firm’s shareholders. But while countless studies in law and finance rely on 13F data, none have turned the microscope around to examine the program itself.
This Article fills this gap by comprehensively mapping 13F’s significant impacts across a wide range of corporate-governance processes. It examines numerous ways 13F shapes the corporate-governance ecosystem, most of which have never previously been identified, much less closely examined. Among other findings, it shows that 13F likely mitigates the short-term bias of hedge fund activism; bolsters institutional-investor advocacy on environmental, social, and governance topics; promotes more “collaborative” engagements between shareholders and managers; drives a robust “competition for votes” ahead of key elections; and facilitates the anticompetitive effects of common ownership.
There is an urgent need to understand these effects. In 2020, the SEC proposed eliminating 90% of 13F reports. Now, there are proposals pending before the Agency and Congress to expand the volume and frequency of reporting. But these proposals and the commentary surrounding them universally fail to consider 13F’s role in corporate governance. In addition to mapping 13F’s current impacts, this Article also analyzes how each proposed reform would reshape this landscape. Surprisingly, I find several areas where shareholders and other corporate stakeholders could be made better off with less transparency about institutional holdings. As policymakers weigh changes to 13F, they should look past the impact on “market transparency” to consider how this information is actually being used on the ground, by whom, and to what ends.
* Associate Professor of Law, University of Kansas School of Law. For helpful comments, I thank Afra Afsharipour, Jordan Barry, Robert Bartlett, chris Bradley, Alon Brav, Jacob Bronsther, William W. Clayton, Madison Condon, Lawrence Cunningham, Elisabeth de Fontenay, Shahar Dillbary, christopher R. Drahozal, Michael Guttentag, John Head, Virginia Harper Ho, Scott Hirst, Gus Hurwitz, Howell Jackson, Guha Krishnamurthi, Richard Levy, Tom Lin, Geeyoung Min, Donna Nagy, Yaron Nili, Uma Outka, James Park, Menesh Patel, Jari Peters, Carla Reyes, Thomas Reyntjens, Bernard S. Sharfman, Michael Simkovic, Holger Spamann, Paul Stancil, Roberto Tallarita, James Tierney, Andrew Torrance, Kyle Velte, Matthew Wansley, Lua Yuille, Corey Rayburn Yung, and David Zaring; anonymous individuals employed by leading hedge fund activists; and participants in the Wharton Financial Regulation Conference, the National Business Law Scholars Conference, the Midwestern Law and Economics Association Annual Conference, the Corporate Law Academic Workshop Series, the Securities Regulation Emerging Voices Panel at the 2022 AALS Annual Meeting, the Business Associations Works-in-Progress Panel at the 2022 AALS Annual Meeting, the Central States Law School Association Annual Scholarship Conference, the Rocky Mountain Junior Scholars Forum, the Finance Faculty Seminar at the University of Kansas School of Business, and faculty workshops at the University of Nebraska College of Law and the University of Kansas School of Law. Special thanks to Robert J. Jackson, Jr., for encouraging me to write on this topic. For excellent research assistance, I thank Sarah Buchanan, University of Kansas School of Law, 2021. For superb editorial and substantive suggestions, I thank all the editors of the Stanford Law Review, especially Aru Gonzalez, Morgan K. Smiley, and Audrey Spensley.