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PreprintCited by 92Corporate Social Responsibility ReportingSustainable Finance and Green BondsCorporate Finance and Governance

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The Real Effects of Environmental Activist Investing

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Naaraayanan, S. Lakshmi, Sachdeva, Kunal, Sharma, Varun·2021·Review of Financial Studies
DOI 10.67929/ecgi-fin-743-2021
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Abstract

We study the real effects of environmental activist investing. Using plant-chemical-level data, we find that targeted firms reduce their production-related emissions. Air quality improvements in the vicinity of targeted plants suggest potentially significant externalities for local economies. Reductions come from increased abatement expenditures and on-site source reduction initiatives, which negatively affect the financial performance of targeted firms. We rule out alternative explanations, including declines in production and plant closures, and provide evidence that firms respond to the specific demands of activists. Our findings suggest that environmental activism is an effective tool for long-term shareholders to address climate change risks.

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Metadata

Authors
Naaraayanan, S. L., Sachdeva, K., & Sharma, V.
Affiliations
  • Center for Economic and Policy Research (US)
  • University of Michigan (US)
  • Nanyang Technological University (SG)
Corresponding author
Naaraayanan, S. Lakshmi
ORCID
Venue
Review of Financial Studies
Publisher
European Corporate Governance Institute (ECGI)
Published
2021-03-30
ISSN
0893-9454 (ISSN-L)
DOI
10.67929/ecgi-fin-743-2021
OpenAlex
W2998578910
Cited by
92
References
0
Citations by year
2026: 6 · 2025: 10 · 2024: 19 · 2023: 24 · 2022: 11 · 2021: 14
FWCI
11.14
Type
journal article
Language
en
Open access
Licence
Locations
  • Review of Financial Studies (publishedVersion, cc-by-nc-nd)
  • SSRN Electronic Journal (publishedVersion)
  • London Business School Research Online (London Business School) (submittedVersion)
Funders
University of California, San Diego
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
  • Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
Keywords
shareholder activism, air quality, pollution prevention, firm financial performance, climate risk, long-term shareholders, externalities

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Naaraayanan, S. L., Sachdeva, K., & Sharma, V. (2021). The Real Effects of Environmental Activist Investing. Review of Financial Studies. https://doi.org/10.67929/ecgi-fin-743-2021