I investigate how index membership affects firms’ product-market strategy. After plausibly exogenous index inclusion, firms gain market share by reducing product prices, giving better trade credit, and increasing sales and marketing expenses. Firms reduce prices for products with low market share and higher switching costs and habits. This comes at the cost of lower profitability, which increases in subsequent periods. Further analysis suggests that managerial learning about an improved funding environment from the post–index inclusion stock price increase is the underlying channel that leads to the observed increase in investment to gain market share. A model further corroborates these findings.

We study the real effects of environmental activist investing. Using plant-chemical-level data, we find that targeted firms reduce their production-related emissions. Air quality improvements in the vicinity of targeted plants suggest potentially significant externalities for local economies. Reductions come from increased abatement expenditures and on-site source reduction initiatives, which negatively affect the financial performance of targeted firms. We rule out alternative explanations, including declines in production and plant closures, and provide evidence that firms respond to the specific demands of activists. Our findings suggest that environmental activism is an effective tool for long-term shareholders to address climate change risks.

We propose an equilibrium corporate bond pricing model that accommodates the heterogeneity in institutional investors’ preferences and mandates in an empirically tractable way. Our model, estimated on rich holdings data, quantifies investors’ preferences and demand elasticities, with inelastic insurers focusing on the investment-grade segment, and elastic mutual funds substituting across ratings groups. The model offers a novel quantitative perspective of the effect of recent trends in institutional ownership on equilibrium credit spreads and the funding costs of corporations. Overall, our model emphasizes the composition of institutional demand as an important state variable for corporate bond pricing.