Corporate Governance

Investors Should Engage With Firms They Want To Go Green, Not Divest

How can investors use capital markets to encourage emissions reductions? In new research, Matthew E. Kahn, John G. Matsusaka, and Chong Shu examine whether public pension funds are more effective in mitigating pollution when they divest from fossil fuel companies or actively engage their management.

Why Business Should Be More Prosocial, and Ten Guidelines for How

Business and economic thought instituted at least since the Reagan revolution in the United States have promoted firms’ narrowly self-interested, profit-maximizing conduct even at the expense of consumers and workers. This paradigm leads to social distrust and insufficient cooperation. Steven C. Salop explains this distortion and proposes 10 guidelines by which firms can self-moderate their behavior to produce prosocial outcomes.

Did the Meme Stock Revolution Actually Change Anything?

Many financial commentators thought that the surge of retail investors participating in the stock market, the most notable of whom boosted “meme stocks” like GameStop, would democratize corporate governance and improve prosocial firm behavior, including the promotion of environmental, social, and governance (ESG) goals. In new research, Dhruv Aggarwal, Albert H. Choi, and Yoon-Ho Alex Lee find evidence that the exact opposite took place.

Market Competition Hurts Firm’s ESG Performance

New research by Vesa Pursiainen, Hanwen Sun and Yue Xiang finds that competition hurts corporate incentives to fulfill environmental, social, and governance (ESG) goals. Firms facing more competitive pressure have worse ESG scores, in particular when the firms have short-term-oriented shareholders. However, firms located in areas that are more concerned about climate change appear more willing to sacrifice profits for better ESG performance.

CEOs Have Real Incentives To Promote ESG

In new research, Michal Barzuza, Quinn Curtis, and David Webber create a framework explaining why CEOs have powerful incentives to promote ESG, why these incentives are distinct from those of shareholders, why they are powerful despite the lack of governance mechanisms, and why they are at times excessive or skewed.

Event Notes: Shareholder Democracy

The Stigler Center for the Study of the Economy and the State hosted with the Rustandy Center for Social Sector Innovation, in partnership with the Financial Times, a virtual event discussing shareholder democracy with Lisa Fairfax, Alex Thaler and Luigi Zingales. The following is a transcript of the event.

ESG Standards’ Good, Bad and Ugly

The Stigler Center for the Study of the Economy and the State hosted a virtual event discussing the standards, metrics and disclosures of investments focused on Environmental, Social and Governance (ESG) goals. The following is a transcript of the event.

Investing in Influence: Investors, Portfolio Firms, and Political Giving

A new paper examines the relationship between the rising concentration in institutional investors' ownership of publicly traded U.S. firms and portfolio companies' political giving....

How To Ensure Industrial Policy Promotes Public Over Private Gain

Industrial policy was once so out of fashion that it was jokingly called “the policy that shall not be named.” Now it’s back in...

The Year’s Top 5 Capitalisn’t Podcast Episodes

This year's top five most-downloaded episodes of Capitalisn't ranged from discussions of private equity and inflation to Capitalism itself. Download these episodes ahead of...

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