• Political Conflict and Corporate Policies: Evidence from the Basque Country

with François Derrien, Stavriana Hadjigavriel, and José Martin-Flores

This paper examines how political conflict affects corporate policies focusing on the Spanish Basque Country. We exploit the announcement by the Basque nationalist terrorist group ETA of the definitive cessation of its armed and extortion activities as an exogenous shock to the exposure of firms in the Basque Country and Navarre to extortion risk. We find that, following the announcement, firms in these regions significantly increase their cash holdings and exhibit higher cash flow sensitivity of cash. They also reduce investment in fixed assets and rely less on short-term debt, consistent with a shift away from strategic liquidity minimization under extortion risk.  Finally, firm performance improves. Overall, the results suggest that political conflict distorts cash management, financing choices, and investment decisions. 

• Climate Disclosure and Director Elections,

with Alexandre Garel and Roni Michaely

This study investigates the impact of climate-related disclosure on investor support for directors in board elections. Firms not disclosing carbon emissions receive significantly more votes against their directors, a trend robust to various controls, including governance proxies, ESG incidents, and proxy advisors’ recommendations. Firms initiating climate disclosure face fewer negative votes. Sustainable funds and universal investors are key drivers of this trend. Moreover, investors supporting shareholder-sponsored climate proposals are more likely to vote against directors in firms lacking carbon disclosure. In the years following a significant fraction of votes against directors, companies are more likely to respond to the CDP questionnaire. Our results suggest that investors vote against directors as a mean to change boards’ approach towards climate change issues and climate disclosure in particular.

• Climate Risk Engagements

with François Derrien, Alexandre Garel, and Feng Zhou

We study climate-risk related engagements by one of the world’s largest investors. Climate risk engagements represent a growing fraction of ESG engagements and are more frequent in high carbon emissions industries. We find that firms with greater carbon footprint and greater exposure to climate transition risk are more likely to be targeted. Following a climate risk engagement, targeted firms are more likely to commit to adopt a science-based climate target and to disclose climate-related information. Targeted firms also experience a reduction in their carbon emissions. However this reduction is limited to scope 1 and 2 emissions and its magnitude is inconsistent with net-zero targets. We also find that climate risk engagements are associated with greater voting support for management. Overall, our results suggest that shareholder engagement on climate issues can be an important tool in the fight against climate change. 

• Mandatory Carbon Disclosure: Evidence from France

with Thomas Bourveau and Alexandre Garel

We examine firms’ response to a carbon disclosure mandate imposed on French firms with more than 500 employees by the Grenelle II law. We find that only half of the firms subject to the mandate comply and file at least one carbon report between 2014 and 2021. Conditional on filing a report, virtually all the firms report their scope 1 and scope 2 emissions. However, only a fraction of the firms report their scope 3 emissions. Similarly, we document considerable heterogeneity in firms’ decisions to provide an action plan to reach targeted reductions in future carbon emissions. Importantly, the propensity to file a carbon report and to include an action plan is lower for firms in more carbon-intensive industries. Finally, we find that expected carbon emission reduction is associated with the actual reduction in emissions, especially for firms that provide clear action plans with quantitative metrics. 

• The Voting Behavior of Woman-Led Mutual Funds

with Alberta Di Giuli and Alexandre Garel

This paper examines the voting behavior of women-led mutual funds. We find that women-led mutual funds are more likely to support environmental and social (ES) proposals, but not governance ones. Women-led mutual funds are also more likely to vote with management in firms headed by female CEOs. This in-group favoritism however does not conflict with the tendency of women-led mutual funds to support ES proposals. Our results suggest that female representation in fund management teams influences their voting behavior.

• The Role of Media in Corporate Governance: Evidence from Shareholder Proposals

with Alberta Di Giuli

This paper examines the role played by the media in the shareholder proposal process. We find a positive relation between media coverage and the likelihood to be targeted by governance proposals. The effect is mostly concentrated in proposals submitted by non-institutional shareholders and driven by negative news. Negative media coverage is also associated with the success of proposals and changes in executive compensation and board turnover. Instrumental variable analysis and tests exploiting local newspaper closures suggest that the relationship between media coverage and shareholder proposals is causal. Our results shed light on a new channel through which the media can play a corporate governance role.