01550nam a22001817a 4500 190312b xxu||||| |||| 00| 0 eng d 0304-405X The unintended consequences of divestment / by Shaun William Davies, Edward Dickersin Van Wesep Shaun William Davies, Edward Dickersin Van Wesep Amsterdam Elsevier June 2018 Pages 558-575 Journal of Financial Economics 128 (3) 0304-405X Abstract A divestment campaign aims to depress share prices to induce managers to change firm behavior. Assuming that managers make profit-maximizing decisions in the absence of a campaign, firms that accede to divestors’ demands raise short-run share prices but depress long-run profits. Managers who are more interested in short-run prices are therefore more motivated by divestment than managers who care about long-run profits. We show that, as most managerial compensation contracts reward long-run profitability and stock returns, divestment can be ineffective at best, and perhaps counterproductive, rewarding managers who attract divestment campaigns. In a quantification exercise, we show that the wealth of most executives running likely divestment targets in 2015 would be unaffected by even large movements in share prices. Of those affected, a substantial majority would benefit from divestment. Divestment Exclusionary investment Socially responsible investment Executive compensation lcc SE 361348 361348 0 0 lcc 0 CL CL PER 2019-03-12 0 2019-03-12 00:00:00 2019-03-12 SE