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The shared costs of pursuing shareholder values

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

Abstract

Does shareholder visibility affect firms' prosocial behavior? What implications for other shareholders? Exploiting quasi-experimental variation from media coverage around Annual General Meetings and major crises (COVID-19 pandemic and Russian invasion of Ukraine), we show that prominent shareholders support costly prosocial initiatives when these yield reputational benefits. In contrast, less-visible financial blockholders oppose such expenditures at their portfolio firms and prefer to act themselves. Prosocial actions driven by reputational motives reduce investment, productivity, and profits by 1 - 3%, imposing costs on other shareholders. Our findings reveal new implications for minority investors of unobservable intra-shareholder conflicts that emerge when examining shareholder incentives.

Suggested Citation

  • Fioretti, Michele & Saint-Jean, Victor & Smith, Simon C., 2025. "The shared costs of pursuing shareholder values," Working Papers 362, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    • Handle: RePEc:zbw:cbscwp:329627
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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