Big Three (Dis)Engagements

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 ex ante firm 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 returns or changes in operating performance or corporate governance outcomes at portfolio companies. 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

Aggarwal, Dhruv and Litov, Lubomir P. and Rajgopal, Shivaram, Big Three (Dis)Engagements (December 5, 2023). Northwestern Law & Econ Research Paper No. 23-17, Northwestern Public Law Research Paper No. 23-53, Available at SSRN: https://ssrn.com/abstract=4580206 or http://dx.doi.org/10.2139/ssrn.4580206