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Investment strategies and corporate behaviour with socially responsible Investors : a theory of active ownership

Author

Listed:
  • Christian Gollier

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Sébastien Pouget

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Socially responsible investors constitute an important force in today's global financial markets. This paper examines conditions under which socially responsible investors induce companies to behave responsibly. We develop an asset pricing model in which some shareholders are active owners, that is, they engage companies by voting on strategic decisions. Differences of objective among shareholders arise because socially responsible investors value corporate externalities. In our baseline model, we show that a firm may choose a responsible strategy even if the majority of investors are not responsible. We also demonstrate that such a choice of a responsible strategy might be fragile because it might depend on investors' self-fulfilling beliefs. We then extend our baseline model to analyse the link between divestment and engagement strategies, the case with multiple firms, the role of benefit corporation charters, and the impact of a large investor.

Suggested Citation

  • Christian Gollier & Sébastien Pouget, 2022. "Investment strategies and corporate behaviour with socially responsible Investors : a theory of active ownership," Post-Print hal-03980874, HAL.
    • Handle: RePEc:hal:journl:hal-03980874
    DOI: 10.1111/ecca.12436
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    Cited by:

    1. Mariusz Tomczyk & Henryk Wojtaszek & Małgorzata Chackiewicz & Małgorzata Orłowska, 2023. "Electromobility and Renewable Energy Sources: Comparison of Attitudes and Infrastructure in Poland and Germany," Energies, MDPI, vol. 16(24), pages 1-34, December.
    2. Olivier Blanchard & Christian Gollier & Jean Tirole, 2023. "The Portfolio of Economic Policies Needed to Fight Climate Change," Annual Review of Economics, Annual Reviews, vol. 15(1), pages 689-722, September.
    3. Christophe Boucher & Wassim Le Lann & Stéphane Matton & Sessi Tokpavi, 2024. "Are ESG ratings informative to forecast idiosyncratic risk?," Working Papers hal-04140193, HAL.
    4. Kim, Daniel & Pouget, Sébastien, 2023. "Do carbon emissions affect the cost of capital? Primary versus secondary corporate bond markets," TSE Working Papers 23-1472, Toulouse School of Economics (TSE).
    5. Ibo, Sunday Adekoya & Olasupo, Rachael Ifeoluwa, 2024. "Normative Accounting Theory and Investment Decision in Selected Listed Manufacturing Companies of Consumer Goods in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 2196-2212, August.

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