Responsible Investment

Monitoring the monitor: evaluating CalPERS’ shareholder activism

January 27, 2008
Image “CalPERS hq” by Coolcaesar at en.wikipedia (CC BY-SA 3.0)

The study evaluates the returns to CalPERS’ activism using two techniques.

First, an event study analysis of 115 firms targeted by CalPERS from 1992 to 2005 finds that that CalPERS’ activism “has resulted in total wealth creation of $3.1 billion USD between 1992 and 2005” on the day their membership on the Focus List was announced. Average returns were negative in only four of the 14 years studied. The mean equal-weighted return over the period was 23 bps (t-stat 2.09), and the value-weighted return was 35 bps (t-stat 1.51).

Second, a long-run analysis using a Carhart-type risk model (returns are explained by market risk, size, valuation, and momentum) “yields intriguing, but inconclusive results. Portfolios of focus list firms earn annualized abnormal returns ranging from 2.4 to 4.8 percentage points annually at holding periods ranging from 6 months to 5 years. If these abnormal returns are causally linked to the activism of CalPERS, the wealth creation is enormous — as much as 20 time greater than the short-run benefits and as large as $89.5 billion USD through December 2005.” The author notes, however, that the returns series is “simply too volatile” to draw the firm conclusion that the CalPERS governance program generates reliably positive long-term returns, and cites failure to adjust for this fact as a shortcoming of prior literature in the field.

The study also includes strong introductory material on the nature of shareholder relationships with corporate managements. It is a must-read for those who wish to learn more about the impact of corporate governance initiatives on firm valuation.

This study was awarded the 2006 Moskowitz Prize (awarded by the Center for Responsible Business at the Haas School of Business, in cooperation with the Social Investment Forum, the Moskowitz Prize promotes the concept, practice, and growth of socially responsible investing). For more information, check the Haas press release


This article was previously published on, January 27, 2008.

This article may be reproduced according to our terms of use with attribution (and link, if online) to To be cited as: “Monitoring the monitor: evaluating CalPERS’ shareholder activism”, Lloyd Kurtz,, January 27, 2008.

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Haas press release
About CalPERS
Personal page Brad Barber
Research Paper

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