IRRCi Past Awards
IRRC Institute Announces Winners of 7th Annual Investor Research Award
The Investor Responsibility Research Center Institute (IRRCi) has announced the winners of its seventh annual competition for research that examines the interaction between the real economy and investment theory.
This research competition has rapidly become a prominent award garnering significant attention amongst the investment community, academia and policymakers. It highlights innovative research focused on the nexus between real world economy activity and investment theory.
The winning academic research paper, Index Funds and the Future of Corporate Governance: Theory, Evidence and Policy, is co-authored by Lucian Bebchuk, James Barr Ames Professor of Law, Economics, and Finance, and Director of the Program on Corporate Governance, Harvard Law School and Scott Hirst, Associate Professor, Boston University School of Law and Research Director, Program on Institutional Investors, Harvard Law School.
This paper studies the resources and decisions of index fund managers — how they monitor, vote and engage with their portfolio companies. This research provides an analytical framework for understanding the incentives of index fund managers, provides the first comprehensive and detailed empirical account of the full range of stewardship activities that index fund managers do and do not undertake, and considers the significant policy implications of the issues analyzed.
The winning practitioner research, Measuring the Sustainability Impact of 25 European ESG Funds, is co-authored by Larry Abele and Antti Savilaakso, both with Auriel Investors.
This research introduces a new quantitative data-driven model to measure the level of sustainable investments in a portfolio as compared against a benchmark by creating a measure called “active ESG (environmental, social and governance) share” intended to quantify the impact of sustainability considerations on the portfolio’s holdings. The research then compares the active ESG share of 25 diversified European ESG funds. It finds that these funds prioritize the provision of environmentally and socially positive products and services by their portfolio companies, but have lower board independence, gender equality and social impacts than their benchmark.
The submissions were of such high quality that the judges selected another research paper for Honorable Mention recognition, Are Sustainability Factors Associated with Stock Price Informativeness? This research is authored by Zabihollah Rezaee, Professor, School of Accountancy, University of Memphis.
The IRRCi is scheduled to dissolve by December 31, 2018. The John L. Weinberg Center for Corporate Governance at the University of Delaware will take over the award beginning in 2019, as well as sustain access to the full body of IRRCi research.
1$10,000 is awarded for each winning paper. If there are multiple authors, the award will be divided evenly between each author. Each award recipient is fully responsible for all applicable taxes.
IRRCi Past Award Recipients
(2012-2017) Previous winners of the Investor Responsibility Research Center Institute Research Award are as follows:
Equity Vesting and Investment, is co-authored by Alex Edmans, London Business School; Vivian W. Fang, Carlson School of Management at the University of Minnesota; and Katharina A. Lewellen, Tuck School of Business at Dartmouth. This paper studies the link between real investment decisions and CEO’s short-term stock price concerns. It finds that vesting equity induces CEOs to reduce investments in long-term projects and to take actions that increase short-term stock price. More broadly, it shows that that the structure of CEO compensation has a causal effect on real-world decisions. Download the research here.
The second winning paper, The Long-Term Consequences of Short-Term Incentives, is also co-authored by Edmans and Fang, together with Allen H. Huang of the Hong Kong University of Science and Technology. This paper studies two corporate actions that allow accurate measurement of the long-term consequences of short-term incentives – stock repurchases and mergers and acquisitions (M&A). The research shows that the impending vesting of equity may lead CEOs to take myopic actions that boost the short-term stock price at the expense of long-term value. An increase in vesting equity is associated with a greater frequency of stock repurchases and M&A announcements, and both corporate events were associated with higher short-term returns and lower long-term returns. Download the research here.
2016 Winning Academic Research: Does a Long-Term Orientation Create Value? Evidence from a Regression Discontinuity is co-authored by Caroline Flammer, Assistant Professor of Strategy and Innovation at Boston University, and Pratima (Tima) Bansal, Professor of General Management and Sustainability at the University of Western University (London, Ontario). The research shows that providing long-term incentives to executives ― in the form of long-term executive compensation ― leads to increased long-horizon investments and higher business performance. Download the research here.
2016 Winning Practitioner Research: The ‘Science’ and ‘Art’ of High Quality Investing is co-authored by Dan Hanson, partner with Jarislowsky Fraser Global Investment Management and lecturer at UC Berkeley Haas, and Rohan Dhanuka, who previously was with the firm. The research examines the issue of “quality”. It finds that investors with a short-term focus tend to undervalue intangible assets — the kind that don’t show up on corporate balance sheets, such as the payoffs from corporate R&D spending, advertising and patent citations. Alternatively, investors and managers who take a long-term view have an opportunity to identify opportunities missed or underpriced by a world focused on the here and now. Download the research here.
In 2016, the submissions were of such high quality that the judges selected two papers for Honorable Mention recognition. The papers receiving Honorable Mention recognition are:
Are CEOs Paid for Performance? Evaluating the Effectiveness of Equity Incentives by Ric Marshall and Linda-Eling Lee, both with MSCI. The paper examines whether CEO pay reflects long-term stock performance, and finds that it does not. It finds that companies that awarded CEOs higher pay incentive levels had below-median returns based on a sample of 429 large-cap U.S. companies observed from 2005 to 2015. On a 10-year cumulative basis, total shareholder returns of those companies with total summary pay below their sector median outperformed those companies where pay exceeded the sector median.
On Enhancing Shareholder Control: A (Dodd-) Frank Assessment of Proxy Access by Stuart L. Gillan with the University of Georgia, and Jonathan B. Cohn and Jay C. Hartzell, both with the University of Texas at Austin. The paper examines a key issue in corporate finance – the optimal division of control between shareholders and management. The research indicates that reforms allowing greater shareholder input via increased proxy access are associated with increases in firm value for those firms in which intervention is needed and where shareholders are more likely to seek board access.
2015 Award: Beyond Divestment: Using Low Carbon Indexes: The winning practitioner research paper provides an actionable roadmap for institutional investors trying to navigate a financially viable path for managing carbon risk. The research provides a new framework for evaluating ways to reduce exposure to both current and potential future carbon-related assets. The research is authored by a team of researchers at MSCI – Remy Briand, Linda-Eling Lee, Sébastien Lieblich, Véronique Menou and Anurag Singh. Download the research here.
2015 Award: Passive Investors, Not Passive Owners: The winning academic research paper demonstrates that while passive investors – such as those that invest through index funds – are not active owners in the traditional sense of accumulating or selling shares so as to exert influence over managers and their choices, they are far from passive owners. Instead, the research finds that passively managed mutual funds, and the institutions that offer them, use their large voting blocs to exercise voice and exert influence on firms’ governance. The authors include Ian R. Appel, Ph.D., assistant professor of finance at the Carroll School of Management at Boston College; Todd A. Gormley, Ph.D., assistant professor of finance at The Wharton School; and Donald B. Keim, professor of finance and director of the Rodney L. White Center for Financial Research at the Wharton School, University of Pennsylvania. Download the research here.
2015 research papers receiving Honorable Mention recognition are:
Does Hedge Fund Activism Lead to Short-Termism? Evidence from Corporate Innovation by Alon Brav (Duke University), Wei Jiang (Columbia University), Song Ma (Duke University) and Xuan Tian (Indiana University).
Active Ownership by Elroy Dimson (London Business School; University of Cambridge), Oguzhan Karakas (Boston College) and Xi Li (Temple University).
Investment Implications of Environment, Social, and Governance Sustainability: Evidence from Short Selling by Archana Jain (Rochester Institute of Technology), Pankaj K. Jain (University of Memphis) and Zabihollah Rezaee (University of Memphis).
Hedging Climate Risk by Mats Andersson (AB4), Patrick Bolton (Columbia Business School), and Frédéric Samamaw (SWF Research Initiative).
Public vs Private Provision of Governance: The Case of Proxy Access by Tara Bhandari (U.S. Securities and Exchange Commission), Peter Iliev (Pennsylvania State University) and Jonathan Kalodimos (Oregon State University).
Does Voluntary Disclosure Of Climate Change Risk Signal Overall Firm Risk? Evidence From Financial Reporting Quality And Firm-Level Investment
Activity by Shira Cohen (Temple University)
Valuing the Vote: The Impact of Proxy Voting on SBA Portfolio Holdings by the Florida State Board of Administration.
2014 Award: Informed Options Trading prior to M&A Announcements: Insider Trading? by Patrick Augustin, Assistant Professor of Finance, McGill University; Menachem Brenner, Research Professor of Finance at New York University Stern School of Business; and Marti G. Subrahmanyam, Charles E. Merrill Professor of Finance, Economics and International Business, New York University Stern School of Business. Download the research here.
2014 Award: Playing it Safe? Managerial Preferences, Risk, and Agency Conflicts by Todd A. Gormley, Assistant Professor of Finance at The Wharton School at the University of Pennsylvania; and David Matsa, Associate Professor of Finance at the Kellogg School of Management at Northwestern University.
2013 Academic Award: Lucian Bebchuk of Harvard Law School, Alma Cohen of Tel-Aviv University Economics Department, and Charles Wang of Harvard Business School for Learning and the Disappearing Association between Governance and Returns. The study shows how financial markets have learned over time to appreciate the significance of certain governance provisions, and to factor these provisions into market prices and earnings forecasts.
2013 Practitioner Award: Edward Waitzer, partner at Stikeman Elliott LLP in Toronto and director of the Hennick Centre for Business and Law at York University, and to Douglas Sarro, a student at Osgoode Hall Law School for The Public Fiduciary: Emerging Themes in Canadian Fiduciary Law for Pension Trustees. The research argues that evolving trends in fiduciary responsibility will impose public and inter-generational obligations of trustees.
2012 Academic Award: Professor Menachem Brenner and Dr. Yehuda Izhakian of New York University’s Stern School of Business for Asset Pricing and Ambiguity: Empirical Evidence, which examines how stock prices are impacted by ambiguity, the unknown probabilities that generate risk as opposed to marketplace volatility.
2012 Practitioner Award: Steve Lydenberg for research Reason, Rationality and Fiduciary Duty, which examines the ability to understand the real world implications of investment decisions rather than just short-term financial implications.