Environmental Externalities of Activism

39 Pages Posted: 13 Jan 2020

See all articles by Pat Akey

Pat Akey

University of Toronto - Rotman School of Management; European Corporate Governance Institute (ECGI)

Ian Appel

UVA Darden

Date Written: November 18, 2019


We study the effect of hedge fund activism on corporate environmental behaviors. Using plant-chemical level data from the EPA, we find that activism campaigns are associated with a 17 percent drop in emissions for chemicals at plants of targeted firms. Campaigns are associated with changes across a wide range of chemicals, including those emitted into the air, water, and ground and those that are harmful to humans. Evidence suggests this change in environmental behavior stems from a drop in production rather than an increase in abatement activities. The net effect on environmental efficiency is positive, with emissions falling by 8 percent per unit of output. Overall, our findings highlight the idea that the benefits of activism are not necessarily confined to shareholders, but may also extend to other stakeholders (e.g., the local community) affected by firms' emissions.

Keywords: hedge fund activism, industrial pollution, CSR

Suggested Citation

Akey, Pat and Appel, Ian, Environmental Externalities of Activism (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3508808 or http://dx.doi.org/10.2139/ssrn.3508808

Pat Akey

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Ian Appel (Contact Author)

UVA Darden ( email )

United States

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