S. LAKSHMI NAARAAYANAN

We study the real effects of environmental activist investing. Using plant-level data, we find that targeted firms reduce their toxic releases, greenhouse gas emissions, and cancer-causing pollution. Improvements in air quality within a one-mile radius of targeted plants suggest potentially important externalities to local economies. These improvements come through increased capital expenditures on new abatement initiatives. We rule out alternative explanations of decline in production, reporting biases, and forms of selection, while also providing evidence supporting the external validity of environmental activism. Overall, our study suggests that engagements are an effective tool for long-term shareholders to address climate change risks.

Operation of residential buildings is responsible for roughly 22% of global energy consumption and 17% of CO₂ emissions. We study the investments triggered by a regulatory intervention requiring rented properties to satisfy minimum energy efficiency standards. The analysis shows significant investments in low capital expenditure retrofits. Using an instrumented difference-in-differences methodology, we show that the investments do not have an economically significant impact on rents, so that landlords are not compensated for them.

We quantify the impact of perceived cancer risk on housing values using widely-advertised national reclassifications of chemical carcinogenicity in the United States. Combining these information events with an empirical design that compares changes in house values closer to affected toxic plants against those farther away isolates the effect of cancer risk news from other local factors. Focusing on plants previously emitting reclassified carcinogenic chemicals, we estimate a 1-2% decline in housing values within a 3-mile radius compared to those located farther away. The effects are stronger in areas with higher media presence underscoring the role of salience as a mechanism.

We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones’ investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms.

Does financing respond to changes in productive opportunities, even for the world’s poor? We answer this question by examining the response of private bank financing to an infrastructure program that brought road access to unconnected Indian villages. This program prioritized roads for villages above specific population thresholds, allowing us to exploit the resultant discontinuities for identification. Using detailed data from a large bank, we find that 75% more villagers get loans, and the average amount lent to them is 30–35% higher, in villages just above these thresholds. District-level analyses further suggest that roads and loans are complements in the growth process.

This study examines whether personal liability for corporate malfeasance deters individuals from serving as independent directors. After the introduction of personal liability in India, we find that individuals are deterred from serving on corporate boards. We find stronger deterrence among firms with greater litigation and regulatory risk, higher monitoring costs, and weak monetary incentives. Expert directors are more likely to exit, resulting in 1.16% lower firm value. Overall, our results suggest that personal liability deters individuals with high reputational costs from serving as independent directors.