Shareholder Proposals: Do They Drive Financial and ESG Performance?

Abstract

We examine the performance of publicly traded companies facing shareholder proposals. We use propensity score matching to identify peer companies to assess the impact of these proposals on performance. Our findings reveal that shareholder proposals are associated with increased nonfinancial performance, as evidenced by improved ESG scores. However, these proposals are associated with a negative impact on financial performance, and the extent of this correlation varies across different financial ratios. Furthermore, the study underscores notable differences in the effects of shareholder activism based on the geographical location of the company's headquarters, specifically between the United States and Europe.

Keywords: shareholder proposals, Financial performance, propensity score matching, Shareholder Activism, proxy fights