The systemic governance influence of expectation documents: evidence from a universal owner

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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We examine expectation documents’ effectiveness as an activism tool. We use the Norwegian sovereign wealth fund’s release of a corporate governance expectation document as a natural experiment. 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 policies 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.

Keywords: expectation documents; corporate goverance; institutional ownership (search for similar items in EconPapers)
JEL-codes: F30 G32 G34 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-04-17
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Published in Review of Corporate Finance Studies, 17, April, 2024. ISSN: 2046-9128

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