Working Papers

with Ulrich Hege and Yifei Zhang

We study the financial markets reaction to climate patents announcements. Exploiting quasi-random variations in patent examiner leniency to allow for causal interpretations, we find that firms with fortuitous climate patent grants benefit from positive medium-run abnormal stock returns and a lower cost of capital compared to similarly innovative but unlucky firms. These effects are amplified during periods of high attention to climate change, for firms with high climate exposure, and for first-time grants of climate patents. Random grants of climate patents also lead to an inflow of responsible institutional investors and to better environmental ratings. They do not produce improvements in the innovator's operating performance or carbon emissions, but the underlying climate technologies do, suggesting that financial markets react to the signal value of climate patent grants.

Investor Valuation for Socially Responsible Assets: A Willingness to Pay Experiment

with Daniel Brodback, Nadja Guenster, and Ruichen Wang

We present an experimental study of investors’ willingness to pay for socially responsible assets. We design an initial public offering experiment in which various assets may be issued with an identical financial risk-return profile but with different intensity and timing of societal benefits. The societal benefits are represented in the experiment by a donation to a charity that materializes only if the asset is issued. In the experiment, subjects attribute a positive value to societal benefits for large but not for low levels of expected donation. Moreover, when the societal benefit occurs along with bad financial performance, assets suffer from a price discount compared to cases in which it occurs with good performance. This implies that utility functions appear to be non-separable in wealth and societal benefit. We offer implications for the design of corporate social responsibility policies and for the pricing of responsible assets.

(Why) Do(n’t) universal investors vote to curb climate change?

with Marie Brière, Martin Schmalz and Loredana Ureche-Rangaud

We study how very diversified and patient institutional investors, also known as universal investors, vote on shareholder resolutions aimed at miti- gating climate change externalities. In our sample, we identify five universal investors, including the Big Three, that we compare to 255 other US fund families over the period from 2013 to 2020. We find that, contrary to the common ownership logic, universal investors support these climate resolutions less than otherwise similar asset managers, and, for the Big Three, less than they support resolutions on general financial and governance issues. These results hold i) for other topics clearly related to externalities, ii) when climate resolutions are supported by ISS, iii) after 2016, iv) when controlling for political contributions of fund families’ CEOs, and v) for both climate reporting and climate action resolutions. We discuss potential explanations and implications of our results.

The Development of Corporate Governance in Toulouse 1372-1946

with David Le Bris and Will Goetzmann

This paper analyzes the development of corporate governance in the Toulouse share- holding companies. Various milling companies that began in the 11th century formally merged into two large-scale, widely held firms by 1372-1373. In the years that fol- lowed they experienced the economic challenges, joint-ownership, moral hazard and monitoring, we now recognize as inherent in the separation of ownership and control. Using new and existing archival research, we show how the Toulouse firms developed institutional solutions to address these economic challenges. These solutions included tradable shares, limited liability, shareholder meetings, governing boards, cash payout policies, accounting audits, and mechanisms for re-capitalization.