Abstract
This study examines empirically the efficiency of private collaborative dialogues between Nordic institutional investors and companies included in the MSCI (Morgan Stanley Capital International) World stock market index. It contributes to an understanding of the conditions that allow active institutional investors to elect to work with more receptive and progressive companies and improve the efficiency of private engagement and dialogue. Stakeholder silence theory and Gond et al.’s model of company perceptions of enablers and barriers to the success of engagement are introduced to analyse the efficiency of private dialogue. The study investigates a proprietary dataset covering the characteristics of 109 complete dialogue processes related to material environmental, social, and corruption issues. The dialogues are led by a professional engagement agent in collaboration with its Nordic clients. The multivariate regression analysis shows that sustainability risk, bureaucracy, and experience are the specific conditions under which the target company can become more receptive to activism by making more progress to address institutional investors’ requests during the hidden dialogue process.
Highlights
Institutional investors concerned about sustainability risks of the investee companies have utilized private engagement and dialogue as the sustainable and responsible investment (SRI) strategy of nonfinancial activism [1,2,3,4,5,6,7]
The purpose of this study is to provide an understanding of the conditions that allow active institutional investors to elect to work with more receptive and progressive companies and improve the efficiency of private collaborative dialogue
This study investigated the company conditions that are important factors of more efficient private engagement and dialogue on sustainability risks
Summary
Institutional investors concerned about sustainability risks of the investee companies have utilized private engagement and dialogue as the sustainable and responsible investment (SRI) strategy of nonfinancial activism [1,2,3,4,5,6,7]. Private engagement and dialogue refers to a sequence of direct communications where target companies take actions to make progress towards addressing specific sustainability changes demanded by institutional investors [4,6,7,9,10]. Existing research has claimed that companies frequently engage in private dialogues with their institutional investors. Research outcomes include the model of shareholder proposal process, responses of companies to shareholder proposals, the antecedents of proposal withdrawals, and the impact of proposal withdrawals on the sustainability performance of target companies [11,15,18,19,20]
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