In our study, we examine the association between hedge fund activism and a target firm’s corporate social responsibility (CSR) activities and whether activists can promote socially responsible investments while upholding shareholders’ interests. Using different matched samples, we find a strong positive association between the target firm’s CSR in the year before it is targeted by activists and its probability of being targeted by a hedge fund. Classifying hedge fund activists into socially and non-socially responsible funds based on their objectives, we (...) find that both give similar level of consideration to a firm’s CSR activities when initiating campaigns. Similar to DesJardine and Durand (DesJardine and Durand, Strategic Management Journal 41:1054–1082, 2020), we demonstrate that hedge funds have, on average, a negative impact on target firms’ CSR in the years following the initial investments. Complementary to DesJardine and Durand (DesJardine and Durand, Strategic Management Journal 41:1054–1082, 2020), we compare the two types of hedge funds and find an asymmetric effect of the hedge funds’ campaigns. Socially responsible hedge fund campaigns are associated with a large _increase_ in their target’s CSR, whereas non-socially responsible hedge funds _decrease_ this measure in their target. Finally, we find that target firms exhibit a long-term improvement in future stock returns and profitability. These findings provide evidence that certain types of activists, such as socially responsible funds, promote both _stakeholder_ and _shareholders’_ long-term interests. (shrink)

Environmental, social, and governance (ESG) investing is synonymous with sustainable investment for socially responsible investors. Unfortunately, the diversity of ESG investing remains unattended amidst the growth in ESG literature, as the academic literature focuses dominantly on measuring performance. An understanding of a wide range of subjects entailing ESG is required before future research on ESG investing is performed. To overcome the challenge, this systematic literature review uses bibliometric mapping to reveal four significant research themes within the ESG investing literature: investor (...) behavior and motivations for ESG investing; cost and risk mitigation in ESG investing; portfolio screening and ESG investing; and ESG performance. The review critically examines each theme and broadens the research agenda for future studies. In addition to the significant themes, this paper also discusses theoretical and recent research trends in the ESG investing literature. The review identifies clashes and crossovers between these themes to appropriately interpret one theme using another and emphasizes the heterogeneity in ESG investing. Lastly, discussion over concerns and criticisms of ESG investing highlights greenwashing as a major cause of concern for investors. (shrink)

AbstractMany management theories have descriptive and normative elements, and no management theory used to generate prescriptions can be totally devoid of normative assumptions. Yet, there remain few useful models for assessing the relative strength or utility of the normative frameworks that inform most management theorizing. In this essay, we offer a model from a field of art rather than science. We introduce the poetry of early twentieth century American writer Hart Crane as providing such a model. Crane uses a panorama (...) of consequences to examine modern social phenomena and subject them to normative evaluation. We argue that management theorists can use a similar panorama of consequences method to “test” normative theories by assessing the directional consistency of the normative evaluations the theories generate about an empirical phenomenon or relationship, as well as how extensively the theories’ normative evaluations cover the full scope of a phenomenon’s or relationship’s impact. We explicate an exemplar poem of Crane’s, and then demonstrate how his method might be used to study shareholder activism, a normatively ambiguous management practice, in a way that illuminates the strengths and weaknesses of the relevant normative frameworks. (shrink)

Climate change is an ethical and moral challenge of a global scale due to its potentially catastrophic implications for human welfare. Understanding forces that drive corporate adaptation to climate change is an important research topic in business ethics. In this paper, we propose that shareholder climate-related proposals could be a catalyst for corporate innovations in technologies mitigating climate change. Our results, based on the analysis of US firms, indicate that corporations respond positively to these proposals by producing more climate-related patents (...) and citations. We also uncover potential casual channels of influence. Further, we find that corporate governance moderates the documented effects. These proposals lead to a more efficient and valuable innovation output, but lower firm performance in the short term. The real effect that shareholder proposals have on innovation gains clarity in the context of climate change, contributing to the discussion of investor “voice.”. (shrink)