Big Three (Dis)Engagements
65 Pages Posted: 26 Sep 2023 Last revised: 6 Dec 2023
Date Written: December 5, 2023
This paper uses newly available data to empirically analyze how the three largest asset managers (BlackRock, Vanguard, and State Street) engage with portfolio companies. We find that asset managers’ choice of engagement targets is virtually unrelated to the firm’s financial performance. Event study analysis finds that targeted firms exhibit transitory negative but tiny abnormal returns when engagements are reported. Engagement is not correlated with ex post stock return or operating performance or corporate governance outcomes at portfolio companies, including CEO compensation, dual-class stock, and the presence of female directors. Asset managers are also not more likely to vote against management at firms selected for engagement. Combined with qualitative evidence regarding the limited resources available to engagement personnel, these results cast doubt on the Big Three asset managers’ ability to be active owners.
Keywords: Corporate Governance, Institutional Investors, Engagement, Executive Compensation
JEL Classification: G32, G38, K42
Suggested Citation: Suggested Citation