Research Insights: When Money is Blue and Red
How do the political values of institutional shareholders affect their investees’ decisions and performance? Rong Yang, Benjamin Forman Professor for Research in Saunders College, set out to answer this question as regards corporate environmental disclosure and performance when institutional shareholders lean either left (Democratic) or right (Republican).
In her co-authored article, “The color of shareholders' money: Institutional shareholders' political values and corporate environmental disclosure,” published in the Journal of Corporate Finance, Yang and her co-authors first determine the political bias of institutional investors based on employees' political donation data. Then, they find that firms led by institutional shareholders with Republican-leaning ideologies are less likely to issue environmental reports or to undertake green innovations.
In summary, Yang concludes that institutional shareholders' political polarization influences corporate engagement in environmental-related activities.
View the paper published by the Journal of Corporate Finance, in October 2020: The color of shareholders' money: Institutional shareholders' political values and corporate environmental disclosure.