Shareholder Activism and Socially Responsible Investors: Equilibrium Changes in Asset Prices and Corporate Behavior

Gollier, Christian and Pouget, Sébastien (2009) Shareholder Activism and Socially Responsible Investors: Equilibrium Changes in Asset Prices and Corporate Behavior. TSE Working Paper, n. 09-081

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Official URL: http://tse-fr.eu/pub/21964

Abstract

We examine the functioning of financial markets when firms can invest in socially responsible activities that produce an externality at a cost. We examine a model in which some investors are altruistic in the sense that they internalize the assets' extra-financial performance when they value their portfolio. There are two mechanisms by which these pro-social investors can influence firm's decisions. They can vote with their feet, thereby raising the cost of capital of non-responsible firms. They can also try to get the majority of shares to impose their view to the management. We also examine a model in which there exists a large investor who can act strategically to influence the beliefs of atomistic investors about his vote. We show that an increase in the degree of pro-social motivation of the large investor may raise its purely financial profit.

Item Type: Monograph (Working Paper)
Language: English
Date: September 2009
JEL codes: G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSM Research (Toulouse), TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:00
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:21964
URI: http://publications.ut-capitole.fr/id/eprint/3217

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