Big Three (Dis)Engagements

Dhruv Aggarwal, Lubomir Litov and Shivaram Rajgopal

Journal of Law and Economics, 2026, vol. 69, issue 4, 853 - 897

Abstract: This paper uses newly available data to analyze how the three largest asset managers (BlackRock, Vanguard, and State Street) structure engagements with portfolio companies. These engagements could be aimed at increasing portfolio values, marketing to clients, or catering to clients’ nonpecuniary preferences. We find little support for engagement being aimed at increasing portfolio values: Asset managers’ choice of engagement targets is unrelated to portfolio firms’ financial performance or negative externalities as proxied by corporate emissions. It is unlikely that engagements are aimed at satisfying clients’ heterogeneous preferences on contested nonfinancial issues. We conclude that the Big Three asset managers likely see engagement as a form of marketing. Targeted firms exhibit negative but tiny abnormal returns when engagements are reported. Engagement is not associated with changes in stock returns, operating performance or governance outcomes at portfolio companies. Asset managers are not more likely to vote against management at engaged firms. While couched in language about long-term value, BlackRock’s alignment of engagement priorities with environmental and social goals … is not consistent with fiduciary and legal obligations. Nor are blanket commitments to vote for directors based upon protected characteristics, such as gender …. If BlackRock were focused solely on financial returns, its conduct would likely be different. (Republican Attorneys General 2022)

Date: 2026
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