In this address, I discuss differences across investor and manager motivations for considering sustainable finance— value versus values motivations—and how these differences contribute to misunderstandings about environmental, social, and governance investment approaches. The finance research community has the ability and responsibility to help clear up these misunderstandings through additional research, which I suggest.

We find that institutional ownership concentration is positively related to the pay‐for‐performance sensitivity of executive compensation and negatively related to the level of compensation, even after controlling for firm size, industry, investment opportunities, and performance. These results suggest that the institutions serve a monitoring role in mitigating the agency problem between shareholders and managers. Additionally, we find that clientele effects exist among institutions for firms with certain compensation structures, suggesting that institutions also influence compensation structures through their preferences.

This paper provides direct evidence supporting the tax‐loss selling hypothesis as an explanation of the January effect. Examining turn‐of‐the‐year return and volume patterns for municipal bond closed‐end funds, which are held mostly by tax‐sensitive individual investors, we document a January effect for these funds, but not for their underlying assets. We provide evidence that this effect can be largely explained by tax‐loss selling activities at the previous year‐end. Moreover, we find that funds associated with brokerage firms display more tax‐loss selling behavior, suggesting that tax counseling plays a role.

Mutual funds are held by investors in taxable and tax‐qualified retirement accounts. We investigate whether the characteristics, investment strategies, and performance of mutual funds held by these diverse tax clienteles differ. Examining both mutual fund distributions and mutual fund holdings, we find that funds held primarily by taxable investors choose investment strategies that result in lower tax burdens than funds held primarily in tax‐qualified accounts. Despite these differences, we find no evidence that any investment constraints that may arise from these tax‐efficient investment strategies result in performance differences between funds held by different tax clienteles.

We survey institutional investors to better understand their role in the corporate governance of firms. Consistent with a number of theories, we document widespread behind‐the‐scenes intervention as well as governance‐motivated exit. These governance mechanisms are viewed as complementary devices, with intervention typically occurring prior to a potential exit. We further find that long‐term investors and investors that are less concerned about stock liquidity intervene more intensively. Finally, we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions.