Title: Environmental Awareness and Shareholder Activism: The Case of the Deepwater Horizon Oil Spill Disaster

Biography:

Claudia Imperatore is an assistant professor at the Accounting Department at Bocconi University. He holds a BSc in Business Administration from Seconda Università di Napoli, a M.Sc. in Accounting, Financial Management and Control from Università di Padovaa, and PhD in Management (specialized in Accounting) at IE Business School, Madrid. She has been a visiting PhD student at University of Chicago and her research interests involve corporate governance, ownership structure, family firms, and role of information especially in periods of uncertainty.

Abstract

We study the effect of increasing environmental awareness on shareholders’ activism. Specifically, we examine whether activists channel such growing awareness through more aggressive shareholder proposals. Methodology: We use the 2010 Deepwater Horizon oil spill disaster as an exogenous shock that increased shareholders’ environmental awareness. We adopt a difference-indifference approach and analyze the spill’s effect on the tone of proposals about environmental issues and the tone of proposals about non-environmental topics. Findings: After the disaster, the tone of environmental proposals (i.e., the treatment group) is significantly more negative, while the tone of non-environmental proposals (i.e., the control group) is unaffected. We interpret this finding as direct evidence that the oil spill led to increased shareholder environmental activism through proposals that targeted more aggressively the environmental risks surrounding the business. By contrast, we find no effect of the oil spill on the tone of managers’ responses to the proposals, consistent with managers’ avoiding to emphasize environmental threats. Originality/value: While recent literature and anecdotal evidence suggests a link between environmental disasters and shareholders’ pressure for corporate change, no prior study has investigated the channel through which shareholders could have exerted such pressure, or has looked for direct evidence of it in the negotiations between shareholders and managers. By finding such evidence in shareholder proposals, we fill in this gap.