Events

Finance Seminar

Author:

• Craig Doidge
  University of Toronto

• Alexander Dyck
  University of Toronto

• Hamed Mahmudi
  University of Oklahoma

• Aazam Virani
  University of Toronto

Can institutional investors generate sufficient power through collective action to drive improvements in governance? We use proprietary data on the private communications of a coalition of Canadian institutional investors to address this question. Firm-level regressions show that private engagements by the coalition influence firms’ adoption of shareholder democracy measures, say on pay advisory votes, and improve compensation structure and disclosure. Spillovers from engaged firms to non-engaged firms and activities to influence regulations and widely publicized governance scores, suggest a broader impact beyond the engaged firms. The coalition’s collection of hard information on governance practices and soft information on firms’ concerns collected through private communications facilitated their successes. The coalition has less impact on controlled corporations and focuses on different governance mechanisms than activist hedge funds. 