Abstract
This paper studies shareholder activism through environmental, social and governance (ESG) proposals over the period 1996 to 2015. Larger, more mature firms with higher institutional holdings are more easily targeted by these proposals. Target firms spend less on capital expenditure and research and development. An equal-weighted portfolio of target firms earns a four-factor alpha of 0.22% on the date of proposal filing. Target firms with subsequent successful proposals earn higher buy-and-hold abnormal returns over the event period and better long-term operating performances than firms whose proposals subsequently fail. These findings provide new evidence on the mechanism and effect of shareholder activism on ESG issues, and support the view that corporate social responsibility is a value-enhancing strategic opportunity rather than an agency problem.
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