Does engagement by large asset managers enhance governance of target firms?

Wataru Hidaka, Naoshi Ikeda and Kotaro Inoue

Pacific-Basin Finance Journal, 2023, vol. 77, issue C

Abstract: We examine the motivations for and effects of institutional investor engagements in Ja-pan using proprietary data of three large asset managers from 2017 to 2019, when demand for responsible investment spiked in response to the revised Stewardship Code of 2017. Our statistical analysis of over 3000 engagement datasets reveals that investors engage with firms with poor governance when they have high stakes in the firms. Further, target firms improve governance and financial performance in the post-engagement period. Thus, in Japan, where historically, investors have not been active in engagement activities, investor engagement can be effective under an appropriate regulatory environment.

Keywords: Institutional investors; Free-rider problem; Private engagement; Corporate governance; Stewardship code (search for similar items in EconPapers)
JEL-codes: G23 G28 G32 G38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:77:y:2023:i:c:s0927538x2200227x

DOI: 10.1016/j.pacfin.2022.101932

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