TY - JOUR
T1 - The systemic governance influence of expectation documents: Evidence from a universal owner
AU - Aguilera Vaqués, R.
AU - Bermejo Boixareu, Vicente Jose
AU - Capape Aguilar, Javier
AU - Cuñat, Vicente
PY - 2024/4/17
Y1 - 2024/4/17
N2 - We examine expectation documents’ effectiveness as an activism tool. We use the Norwegian sovereign wealth fund’s release of a corporate governance expectation document as a natural experiment. We introduce a novel, three-way analytical decomposition of the firms, the fund, and their joint response to this document. Firms’ governance practices adapt to the fund’s new portfolio-wide governance preferences, with heterogeneous responses across ownership and firm characteristics. The fund’s investment policies also change, even at the expense of financial returns. Overall, our research demonstrates the potential effectiveness of expectation documents as an emerging, low-cost activism tool for universal investors.
AB - We examine expectation documents’ effectiveness as an activism tool. We use the Norwegian sovereign wealth fund’s release of a corporate governance expectation document as a natural experiment. We introduce a novel, three-way analytical decomposition of the firms, the fund, and their joint response to this document. Firms’ governance practices adapt to the fund’s new portfolio-wide governance preferences, with heterogeneous responses across ownership and firm characteristics. The fund’s investment policies also change, even at the expense of financial returns. Overall, our research demonstrates the potential effectiveness of expectation documents as an emerging, low-cost activism tool for universal investors.
KW - Financial Policy
KW - Corporate Governance
KW - Institutional Ownership
U2 - 10.1093/rcfs/cfae009
DO - 10.1093/rcfs/cfae009
M3 - Article
SN - 2046-9136
JO - The Review of Corporate Finance Studies
JF - The Review of Corporate Finance Studies
M1 - cfae009
ER -