Do Salient Climatic Risks Affect Shareholder Voting?

Abstract

Institutional shareholders affected by hurricanes subsequently support environmental proposals in non-affected firms even if they never voted for similar initiatives. Affected shareholders raise their holdings in firms where their pro-climate votes are consequential. More voting support after hurricanes has real effects as environmental proposals endorsed by more hurricane-afflicted shareholders are more likely to pass. Moreover, upon passing environmental proposals, firms exhibit non-trivial decreases in their market capitalization and downgrades by equity analysts. Our evidence indicates that by changing shareholders’ perceptions of the risks faced by their portfolio firms, disruptive life events ultimately shape environmental activism, corporate policies, and firm performance.

Keywords: Shareholder voting; Hurricanes; Risk perception; Salience; Behavioral bias

JEL Classification: D72; D91; G41; Q54