Document de travail

The "Washing Machine": Investment Strategies and Corporate Behavior with Socially Responsible Investors

Christian Gollier et Sébastien Pouget

Résumé

This paper studies shareholder engagement in companies' strategic decisions. Differences of objective among shareholders arise in our model due to the presence of socially responsible investors. These investors take externalities into account when valuing their portfolio while conventional investors do not. Shareholders may affect corporate behavior via two mechanisms. They can vote with their feet: responsible investors may shy away from firms producing negative externalities, thereby raising their cost of capital. Investors can also engage in activism. Our main contribution is to show that a large activist investor can generate positive abnormal returns by investing in non-responsible companies and turning them into responsible. We call this strategy the \Washing Machine" and show that its successful implementation relies on a long-term horizon and a credible pro-social orientation.

Mots-clés

Asset pricing; corporate social responsibility; socially responsible investments; corporate engagement; shareholder activism;

Codes JEL

  • G34: Mergers • Acquisitions • Restructuring • Corporate Governance
  • H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies

Remplacé par

Christian Gollier et Sébastien Pouget, « Investment Strategies and Corporate Behaviour with Socially Responsible Investors: A Theory of Active Ownership », Economica, vol. 89, juin 2022, p. 997–1023.

Référence

Christian Gollier et Sébastien Pouget, « The "Washing Machine": Investment Strategies and Corporate Behavior with Socially Responsible Investors », TSE Working Paper, n° 14-457, janvier 2014.

Voir aussi

Publié dans

TSE Working Paper, n° 14-457, janvier 2014