The Shared Costs of Pursuing Shareholder Values

Michele Fioretti, Victor Saint-Jean and Simon C. Smith

Papers from arXiv.org

Abstract: We uncover latent conflicts among shareholders, showing how private reputational rents for a few impose losses on many. Exploiting predetermined Annual General Meeting dates relative to COVID-19 and the Russian invasion of Ukraine as exogenous media spotlights, we find that prominent individual shareholders backed early donations or rapid exits from Russia to enhance their reputations. Less visible financial investors opposed such actions and pursued their reputation through their own giving instead. Our design accounts for governance, managerial access, and alternative shareholder motives. Firms most exposed to rent-seeking reduced investment, productivity, and profitability by 1-3%, with adverse effects lasting two years.

Date: 2021-03, Revised 2025-09
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