The Cost (and Unbenefit) of Conscious Capitalism

58 Pages Posted: 20 Sep 2021 Last revised: 31 Dec 2022

See all articles by Jitendra Aswani

Jitendra Aswani

MIT Sloan Finance Group

Alona Bilokha

Fordham University

Mingying Cheng

Fordham University - Gabelli School of Business

Benjamin M. Cole

Fordham University; Fordham University - Gabelli School of Business

Date Written: September 3, 2022

Abstract

Does ‘voluntary’ stakeholder governance (or conscious capitalism) benefit stakeholders? Using the state-level staggered adoption of constituency statutes as a quasi-exogenous shock to corporate governance, we find that discretionary adoption of ‘stakeholder governance’ leads to wealth transfer from shareholders to management without benefitting other stakeholders (such as labor, customers, and creditors). A 1.7% decline in price-to-earnings growth coincides with a gain of 0.65% in the managerial entrenchment. Non-shareholder stakeholders do benefit but only when entrenchment diminishes. These results are robust to endogeneity tests, biased correction in staggered DiD, and various other tests.

Keywords: Conscious Capitalism, Stakeholder Governance, Managerial Accountability, Corporate Transparency, Constituency Statutes

JEL Classification: G21; G30; M14; L51

Suggested Citation

Aswani, Jitendra and Bilokha, Alona and Cheng, Mingying and Cole, Benjamin M., The Cost (and Unbenefit) of Conscious Capitalism (September 3, 2022). Available at SSRN: https://ssrn.com/abstract=3926335 or http://dx.doi.org/10.2139/ssrn.3926335

Jitendra Aswani (Contact Author)

MIT Sloan Finance Group ( email )

Cambridge, MA

Alona Bilokha

Fordham University ( email )

New York, NY 10023
United States

Mingying Cheng

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
Bronx, NY 10458
United States

Benjamin M. Cole

Fordham University ( email )

45 Columbus Ave., Ste 522
New York, NY 10023
United States
646-312-8261 (Phone)
646-312-8295 (Fax)

HOME PAGE: http://www.bnet.fordham.edu/bmcole/

Fordham University - Gabelli School of Business ( email )

45 Columbus Ave., Ste 522
New York, NY 10023
United States
646-312-8261 (Phone)
646-312-8295 (Fax)

HOME PAGE: http://www.bnet.fordham.edu/bmcole/

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