Camillo Riva: Do Environmental and Social Funds Sell When They Disagree?Research Seminar by Dr. Camillo Riva.
Date: 27 November 2023, Monday
Time: 11:40-13:00 (Budapest time)
Venue: Corvinus Main building, second floor, Room E.279.1
Organizer: Institute of Finance
Camillo Riva: Do Environmental and Social Funds Sell When They Disagree?
Abstract: We investigate the role of Environmental and Social (ES) funds in corporate governance through exit. ES funds constrain their asset allocation to “good” ES stocks and our hypothesis is that this reduces their ability to influence portfolio firms through the threat of exit. We empirically test this hypothesis by studying their portfolio behavior when they are in disagreement with management at the general assembly of portfolio companies. We find that, contrary to conventional funds, ES funds do not sell portfolio companies when their voting behavior is in contradiction with the management or the voting outcome. Consistent with asset allocation constraints, the results are mainly valid when there are few firms of equally good ES standing available to replace portfolio firms. These results cannot be explained by the differences in characteristics and holdings between ES and conventional funds. Our results cast doubts on the ability of ES funds to influence the policies of portfolio firms through governance via exit.
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