Document Type

Honors Thesis

Publication Date

Spring 5-2018


The purpose of this study was to test the impact of passive and active ownership on total shareholder return (TSR) and environmental, social, and governance (ESG) score of firms. The motivation behind the study is the rise in passive investing over the last few decades and the concern that passive owners are not able to engage sufficiently with management of the companies they are invested in.

This study hypothesized that firms that are actively controlled have high TSR and higher ESG scores than firms that are passively controlled. The hypothesis was supported by the reasoning that passive owners lack the incentives and resources to monitor their holdings, and that they cannot use the threat of exit to provoke corporate management to act in their best interest.

This study finds empirical evidence that passive controlling ownership has a positive impact on companies’ one-year total shareholder return. Being passively controlled was found to increase a firm’s one-year TSR by 6.94 percent compared to not being controlled. No significant relationships between controlling ownership and ESG score were found.

Included in

Finance Commons