The Shared Costs of Pursuing Shareholder Values

Abstract

We study how shareholder values shape firms' costly prosocial actions and who bears their costs. We develop a model in which some shareholders are publicly associated with a firm (e.g., founders or other prominent individual blockholders). When the firm takes a visible action under intense media scrutiny, these shareholders can plausibly claim credit and gain reputation, while diversified institutional investors cannot. The key empirical challenge is that influence is rarely observed: many consequential decisions are not subject to shareholder proposals or votes. We therefore use predetermined annual general meeting (AGM) timing combined with large, sudden crises -- COVID-19 and the invasion of Ukraine -- to generate quasi-experimental variation in attention and attribution, and to study highly visible, high-cost actions that were not legally required at onset. Firms with prominent individual blockholders are more likely to donate or exit when their AGM falls at crisis onset, while firms with large diversified institutional owners are less likely to do so. Consistent with our mechanism, online searches rise for prominent individuals after firm actions but not for institutions. Using an intent-to-treat triple-difference design on the 1,000 largest U.S.-listed firms, we find that exposed firms reduce investment, productivity, and profitability by 1--3\% for up to two years, highlighting the shared costs of pursuing the values of a visible minority.