Workshop’s Topic: With hand-collected information on board sustainability committees for the S&P1500 companies, this paper investigates both drivers and effects of firms’ decisions to establish the committee from the perspective of investor demand for corporate sustainability. We find that firms under pressure to attract institutional investors and enhance environmental and social (ES) reputation are more likely to establish a sustainability committee at the board level. Using a difference-in-difference event study approach, we find that firms experience an increased equity ownership by socially responsible institutional investors and a decline in ES-related shareholder proposals after adopting a sustainability committee, relative to non-adopting firms matched on the ex-ante adoption propensity. The shareholder responses in adopters can be ascribed to elevated ES reputation and reduced ES risk after adopting the committee. Finally, we find evidence for a lower cost of equity capital for firms with a sustainability committee than those without. Overall our findings indicate that the presence of a sustainability committee serves to reconcile shareholder interests and stakeholder claims on corporate sustainability.

Time and Location: 10:00 AM (GMT+8), Room A423 (School of Management)

Language: Bilingual (Chinese and English)