The Systemic Governance Influence of Universal Owners: Evidence From an Expectation Document

The Systemic Governance Influence of Universal Owners: Evidence From an Expectation Document

Ruth Aguilera, Vicente J. Bermejo, Javier Capapé, Vicente Cuñat

Series number :

Serial Number: 
625/2019

Date posted :

August 28 2019

Last revised :

December 07 2021
SSRN Share

Keywords

  • Corporate governance • 
  • Institutional ownership • 
  • Expectation DocumentS

We examine expectation documents’ effectiveness as an activism tool. We use as a natural experiment, the unforeseen release by the Norwegian sovereign wealth fund of a corporate governance expectation document. 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 polices 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

 

Authors

Real name:
Javier Capapé
Dr
Real name:
Research Member
Department of Finance, London School of Economics
Real name:
Vicente J. Bermejo