Essays on ESG, Shareholder Activism and Voluntary Programs

Abstract

Chapter 1 examines whether—in the absence of mandated disclosure requirements—shareholder activism can elicit greater disclosure of firms’ exposure to climate change risks. We find that environmental shareholder activism increases the voluntary disclosure of climate change risks, especially if initiated by institutional investors, and even more so if initiated by long-term institutional investors. We also find that companies that voluntarily disclose climate change risks following environmental shareholder activism achieve a higher valuation post disclosure, suggesting that investors value transparency with respect to firms’ exposure to climate change risks.

Chapter 2 studies the incredible investment challenge that common owners face: managing systematic risk. Because common owners hold shares in multiple firms across an industry, an action (or inaction) by one firm that affects industry peers is felt more severely by common owners than by non-common owners. Drawing on research showing that one firm’s corporate social responsibility (CSR) can produce positive spillovers for peer firms and that its irresponsibility can harm its peers, we argue that common owners increase firms’ CSR to produce spillovers that reduce systematic risk and multiply their investment returns. Consistent with our theory, we find that common ownership is positively associated with firm CSR. Unpacking that relationship, we find that increases in CSR are driven by common owners with long-term orientations and are concentrated in stake-holder sensitive industries, in which CSR spillovers are most economically impactful. We also find that common owners focus their efforts on financially material CSR over financially immaterial CSR. We use a natural experiment with a quasi-exogenous shock to rule out alternative explanations.

Chapter 3 studies the voluntary program called the OHSAS 18001 Occupational Health and Safety Management system standard. Millions of companies around the world have adopted management system standards like OHSAS 18001 to both convey superior operational performance and to improve their operations. Yet because these standards impose requirements on operational processes and procedures, it is largely unknown whether adopting these standards actually bears any relationship with operational performance. We examine this question in the context of OHSAS 18001. Analyzing proprietary certification data from some of the world’s largest certification companies and injury microdata from the U.S. Bureau of Labor Statistics, we find that U.S. establishments certified to the OHSAS 18001 standard indeed tend to be safer workplaces. The OHSAS 18001 standard attracts establishments with fewer injury and illness cases than comparable non-adopters (a selection effect), and certification leads to subsequent declines in such cases (a treatment effect). These results provide rare evidence the adoption of a management system standard serves both as a credible indicator of superior operational performance, as well as a means to improve performance.