Does Money Talk? Divestitures and Corporate Environmental and Social Policies

Abstract Can shareholders’ divestitures and threats of exit trigger improvements in firms’ environmental social (E&S) policies? We show that E&S incidents are followed by some, but relatively small, divestitures. Nevertheless, following incidents, firms with a one-standard-deviation higher E&S-conscious institutional ownership decrease their greenhouse gas emissions 36.5% improve scores 7.2% more than other if managers receive equity compensation. do not observe any associated sales countries. Our results suggest the future exits can policies shareholders managers’ compensation is linked to stock price.