With Bige Kahraman and Michelle Lowry

We examine whether shareholder votes in environmental and social (ES) proposals are informative about firms’ ES risks. ES proposals are unique in that they nearly always fail. We examine whether mutual funds’ support for these failed proposals contains information about the ES risks that firms face. Higher support in failed ES proposals predicts subsequent ES incidents and the effects of these incidents on shareholder value. Examining the detailed records of fund votes, we find that agency frictions between a group of shareholders contribute to proposal failure.

• Presentation: 2020 EFA, 2020 World Symposium on Investment Research, 2020 Bocconi-Consob-ESMA conference, 2019 Mutual Funds, Hedge Funds and Factor Investing, 2019 Sustainable Finance Forum, 8th Luxembourg Asset Management Summit, (by co-authors:) the Vanguard group, 2020 FMA Consortium on Asset Management, Oxford University, Cass Business School, 4th Annual Philly Five Research Conference in Drexel, Essex Business School

With Tao Li

We study the role of social networks in hedge fund activism. Actively managed funds whose managers are socially connected to activists are more likely than unconnected managers to invest in target stocks; their investment decisions are profitable. Importantly, such effects are greater for funds facing more severe information asymmetry. Connected funds are 14.2 percentage points more likely to support activists in proxy contests and contribute to reducing proxy contest costs. Our evidence shows that social ties benefit both connected investors and activists, and suggests that social networks reduce information asymmetry around activist campaigns by facilitating information exchange and increasing trust.

• Presentation: 2017 EFA, 2017 FMA Annual Conference, 2017 FMA European Conference, 2017 FMA Consortium on Institutional Investing and Hedge Funds, 9th Annual Conference on Hedge Funds 2017, 2017 Berlin Asset Management conference, 2017 CEPR Second Annual Spring Symposium in Financial Economics (poster), 2017 Hedge Fund Conference Manchester (poster), (by co-author:) Penn State, University of Florida, Rutgers, Texas A&M, Fordham, University of South Carolina

• Media coverage: Seeking Alpha

This paper studies the communication of “voice” in shareholder activism. Using hand-collected data, I investigate how the use of investor presentations, among other communication strategies, affects the outcomes of proxy contests. Being the first to make presentations to investors increases the dissident's chance of winning by 60%. To understand this first-mover advantage, I examine the allocation of investor attention and variation in investor sophistication. The evidence is consistent with an explanation of limited investor attention. The findings highlight the role of communication in corporate governance.

• Presentation: Oxford University, Rotterdam School of Management, WU (Vienna University of Economics and Business), Gothenburg University, Professional Development Workshop in 2018 Reputation Symposium in Oxford, 2019 FMA Annual Conference, 16th Corporate Governance Day in Groningen, 20th Workshop on Corporate Governance and Investment in Oslo, 30th Annual Conference on Financial Economics and Accounting in NYU

• Semi-finalist of FMA 2019 Annual Conference best paper in corporate finance

This paper utilises a rich literature on institutional investors' governance roles and develops simple measures of institutional discontent expressed through holding, trading and voice channels to predict hedge fund activism target selection. Discontent expressed through all three channels leads to subsequent targeting. Medium sized dissatisfied owners and sellers seem to be the main driving force and institutions' discretionary disagreement on management compensation and governance related proposals have the highest explanatory power. Activists are more likely to gain higher announcement returns and threaten to take hostile actions against management with more discontent institutional investors in the target companies. Discontent institutions are more likely to vote pro-activist in the annual meetings after campaigns. 

• Presentation: 2018 FMA European Conference, 5th ECGC Workshop on Governance and Control, 10th Annual Hedge Fund and Private Equity Research Conference (poster), Annual Accounting Conference 2018, Eastern Finance Association 2018 Annual Meetings