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Shareholder Engagement on Environmental, Social, and Governance Performance

64 Pages Posted: 31 May 2017 Last revised: 26 Sep 2017

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: June 1, 2017

Abstract

We study investor activism promoting environmental, social and governance (ESG) improvements by means of a proprietary dataset covering 660 companies globally over 2005-2014. Targets have a higher market share, analyst coverage, stock returns, and liquidity. The engagements lead to significant ESG rating adjustments. Activism is more likely to succeed for companies with a good ex ante ESG track record, and with lower ownership concentration and growth. Successful engagements positively affect sales growth, without changing profitability. Targets outperform matched firms by 2.7% over 6 months post-engagement, while the (ex ante) lowest ESG quartile earns an extra 7.5% over 1 year.

Keywords: investor 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 (June 1, 2017). 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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