ICPM News March 2017
ICPM Research Committee awards funding to two research papers
Delivering relevant and valuable pension research is central to ICPM’s mandate and highly valued by Research Partners. The below papers were awarded funding by the ICPM Research Committee.
Does Corporate Social Responsibility Create Shareholder Value? The Importance of Long-Term Investors
by Ambrus Kecskés, Schulich School of Business at York University; and Sattar Mansi, Virginia Tech and Phuong-Anh Nguyen, Schulich School of Business at York University
We study the effect of corporate social responsibility (CSR) on shareholder value. We argue that long-term investors can ensure that managers choose CSR to maximize shareholder value. We find that long-term investors do increase the value to shareholders of CSR, not through higher cash flow but rather through lower cash flow risk. Following prior work, we use indexing by investors and state laws on stakeholder orientation for identification. Our findings suggest that investing in CSR can create shareholder value as long as managers are properly monitored by long-term investors.
Connections and Conflicts of Interest: Investment Consultants Recommendations
Shikha Jaiswal, Goizueta Business School, Emory University
Plan sponsors rely on investment consultants' recommendations for hiring money managers to manage their plan funds. Often these investment consultants have their own investment management rms, or have business connections with investment managers, creating a conflict of interest. I find strong evidence that consultants bias hiring decisions towards their connected managers: a direct connection to a consultant increases a manager's odds of being hired by 631%, while an indirect connection increases the odds by 292%. The hiring decisions are less sensitive to past performance and management fee when connected managers are hired. I further find that, post hiring, the funds managed by the connected managers underperform significantly relative to the funds managed by the unconnected managers.