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Governing Global Externalities: Investor Voice Amid Fragmented Policy

Author

Listed:
  • Robin Döttling
  • Doron Levit
  • Nadya Malenko
  • Magdalena Rola-Janicka

Abstract

We study whether investor voice can help address global externalities under fragmented regulation. In our setting, a multinational firm generates externalities across jurisdictions, national regulators face political frictions that can impede corrective regulation, and policy differences create scope for regulatory arbitrage and production leakage. We compare two channels of investor influence: corporate stewardship, which affects firms’ global operations, and policy advocacy, which affects local regulation. Both channels can help address global externalities, but their relative effectiveness depends on political frictions abroad. When these frictions are severe enough to prevent foreign regulation, leakage weakens policy advocacy but strengthens stewardship. When foreign regulation is politically feasible, however, stewardship can crowd out foreign regulation and reinforce policy miscoordination, while local policy advocacy can crowd in foreign regulation and reduce externalities abroad.

Suggested Citation

  • Robin Döttling & Doron Levit & Nadya Malenko & Magdalena Rola-Janicka, 2026. "Governing Global Externalities: Investor Voice Amid Fragmented Policy," NBER Working Papers 35778, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35778
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    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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