Shareholder Engagement on Environmental, Social, and Governance Performance

67 Pages Posted: 31 May 2017 Last revised: 13 Apr 2018

Tamas Barko

University of Mannheim - Finance Area

Martijn Cremers

University of Notre Dame

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: April 2018

Abstract

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 nonengaged 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

Suggested Citation

Barko, Tamas and Cremers, Martijn and Renneboog, Luc, Shareholder Engagement on Environmental, Social, and Governance Performance (April 2018). CentER Discussion Paper Series No. 2017-040; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 509/2017 ; TILEC Discussion Paper No. DP 2017-021. Available at SSRN: https://ssrn.com/abstract=2977219 or http://dx.doi.org/10.2139/ssrn.2977219

Tamas Barko (Contact Author)

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

K. J. Martijn Cremers

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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