The Regulation of Shareholder Democracy with John Matsusaka, Chong Shu and Irene Yi
Columbia Law School Blue Sky Blog
Abstract: We study how investors, managers, and firms responded to an unexpected change in SEC proxy guidelines expanding shareholders' ability to bring climate-related proposals to a vote. High-carbon-emitting firms experienced −1.6 percent abnormal returns following the announcement, yet showed no evidence of reduced actual or pledged emissions, reduced toxic releases, or increased clean-technology investment. These firms increased engagement with sponsors and stakeholders, consistent with managerial distraction, though estimated costs appear too small to explain the value loss. The absence of real effects, with evidence on policy expectations, suggests investors interpreted the change as signaling unfavorable future environmental policy, beyond proposal rights.
Exchange Rate Shocks to Working Capital, Financing Frictions and Real Fragility with Okan Akarsu and Unal Seven
Abstract: We examine how exchange rate shocks propagate to firm outcomes and amplify through working capital and financing frictions. Guided by a model with cash-in-advance constraints on production and external borrowing constraints tied to pledgeable income, our analysis exploits firm-specific seasonality and foreign exchange surprises for empirical identification. Using an extensive array of administrative datasets from Türkiye (2010-2024), we isolate real effects on productive capacity that are clear of confounding macroeconomic shocks. We find that currency depreciations arriving in main quarters trigger significantly larger contractions in purchases, sales, and production than depreciations in non-main quarters. Firm-specific bank credit also tightens, with sharper reductions in short-term loans than long-term loans. These effects are strongest for SMEs, highly leveraged, and import-dependent firms. Firms with long cash-conversion cycles in construction and services are particularly vulnerable. Our results establish a novel form of real fragility following currency depreciations. Contrary to textbook predictions of trade competitiveness, depreciation-induced increases in input costs force cuts in purchases, reducing sales and pledgeable income. The resulting deterioration in borrowing capacity further tightens external finance and amplifies the contraction.