We examine whether broad-based public engagement by institutional investors influences the behavior of portfolio firms. We investigate this question in the context of BlackRock’s annual Dear CEO letter, which in recent years has called for portfolio firms to acknowledge and quantify the impact of environmental and regulatory factors on their firms. We find that portfolio firms’ disclosures during the post-letter period reflect topics similar to those discussed in the letters, controlling for a variety of firm and disclosure characteristics and the occurrence of private engagements. Moreover, BlackRock appears to value these additional disclosures, as it more often votes with management on shareholder proposals during subsequent annual shareholder meetings. Finally, motivated by BlackRock’s attempts to mobilize firms toward its specific policy recommendations, we also provide some evidence that firms’ lobbying efforts during the post-letter period become more aligned with the issues highlighted in the letter, especially when firms’ share BlackRock’s policy preferences ex ante. Taken together, our evidence suggests that portfolio firms are responsive to BlackRock’s public engagement efforts.

This study investigates whether brokerage houses appear to provide stock tips to politicians. Our results indicate that trades by politicians who are politically connected to the brokerage house where the trade is executed are more profitable. Our estimates suggest that these connected trades earn an incremental 0.3% over a five-day window relative to the politician's average profitability. Given the average number of trades our sample politicians execute in a year, the 0.3% return per trade translates to an incremental $3,411 in trading profits each year. We provide additional support by investigating the frequency and differential profitability of politicians' trades immediately before the brokerage house issues a revised recommendation, as well as during a period when Goldman, Sachs & Co. was sanctioned for providing stock tips to high priority clients. Additional tests suggest that brokerages may provide stock tips to politicians in exchange for favorable legislative outcomes or political information.