Shareholder Engagement on Environmental, Social, and Governance Performance
CentER Discussion Paper Series No. 2017-040
63 Pages Posted: 31 May 2017 Last revised: 5 Sep 2018
Date Written: September 2018
We study investor activism promoting environmental, social and governance (ESG) improvements using a proprietary dataset. Targets have a higher market share, analyst coverage, stock returns, and liquidity. The engagements lead to ESG rating adjustments. Activism is more likely to succeed when targets have a good ex ante ESG track record, lower ownership concentration and growth. Successful engagements positively affect sales growth, without changing profitability. A portfolio of targeted firms earns superior returns to that of matched firms. E.g., targets in the ex ante lowest ESG quartile outperform non-engaged peers by 4.7%. Similarly, successful engagements generate higher returns than unsuccessful ones.
Keywords: activism; corporate social responsibility; socially responsible investing (SRI); engagement; environmental, social and governance (ESG)
JEL Classification: G15, G23, G32, G34, G39
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