Rob Bauer

• Professor of Finance
• Professor (Full) at Maastricht University

We analyze the disclosures of sustainable investing by Dutch pension funds in their annual reports by introducing a novel textual analysis approach using state-of-the-art natural language processing techniques to measure the awareness and implementation of sustainable investing. We find that a pension fund's size increases both the awareness and im...

We link records of firm performance, equity analyst forecast errors, and stock returns around companies’ earnings announcements to firm-specific measures of heat exposure for more than 17,000 firms in 93 countries from 1995 to 2019. We find that increased exposure to extremely high temperatures reduces firms’ revenues and operating income. A one-st...

To understand what motivates individuals to look at their pension situation and make adequate savings decisions, we conduct two field experiments with 226,946 and 257,433 pension fund participants. We find peer-information statements do not increase the rate at which individuals check their pension information, but lottery-type financial incentives...

We investigate the effect of insider ownership on corporate bond yield spreads from 2003 to 2014 using a sample of 10,460 bonds issued by 1,222 non-financial firms from 44 countries. Using this sample, we find on average that greater insider ownership is associated with a higher yield spread. We consider consumption of private benefits as an econom...

The United Nations’ Sustainable Development Goals (SDGs) have created societal and political pressure for pension funds to address sustainable investing. We run two field surveys (n = 1,669, n = 3,186) with a pension fund that grants its members a real vote on its sustainable-investment policy. Two-thirds of participants are willing to expand the f...

The unique regulation of U.S. public pension funds links their liability discount rate to the expected return on assets, which gives them incentives to invest more in risky assets in order to report a better funding status. Comparing public and private pension funds in the United States, Canada, and Europe, we find that U.S. public pension funds ac...

Significance Wealthy individuals play an important role in charitable giving. We present evidence that millionaires give more than any other group studied in the literature. This holds particularly in a clear giving situation. In our study, millionaires either participated in a dictator game or an ultimatum game and they either interacted with anot...

This article explores the role of financial markets for sustainable development. More specifically, the authors ask to what extent financial markets foster and facilitate more sustainable business practices. The authors highlight that their current role is rather modest and conclude that, on the old paths, a paradoxical situation exists. On one han...

Manuscript Type: Empirical Research Question/Issue: We study more than 12,000 shareholder proposals that were filed to S&P1500 companies from 1997 to 2009, and investigate the determinants of proposal withdrawal by the sponsoring shareholder. We also study the effectiveness of withdrawn proposals as a corporate governance device. Research Findin...

We study the global corporate engagement activities of a large UK-based asset manager from 2006 to 2011. Using proprietary data on these activities, we find that corporate engagements “behind-the-scenes” are frequently used to change corporate behavior. We show that geography is an important determinant for the occurrence of such engagements: UK fi...

Using an international pension fund database, we compare the asset allocations, liability discount rates, and performance across six groups: public and private pension funds in three regions (United States, Canada, and Europe). U.S. public funds face distinct regulations that link the liability discount rate to their expected return on assets rathe...

This paper investigates how social identification influences investment decisions of retail investors. We collected survey data from clients of two banks that exclusively offer socially responsible investment (SRI) products and savings accounts. The majority of the clients of these banks also use investment services from conventional banks. We find...

We document the net equity performance of US defined benefit and defined contribution schemes at plan level, using a unique and comprehensive database. Pension fund performance is measured taking into account fund-specific benchmarks and multiple cost components. Pension funds perform close to their benchmarks, whereas size-matched mutual funds str...

On December 14, 2011, the Wall Street Journal carried an article titled “A Manifesto for Sustainable Capitalism” by former US Vice President Al Gore and his partner at Generation Investment Management, David Blood. The article signaled the launch of their white paper on sustainable capitalism, which set out five broad recommendations. On June 4, 20...

On December 14, 2011, the Wall Street Journal carried an article titled “A Manifesto for Sustainable Capitalism” by former US Vice President Al Gore and his partner at Generation Investment Management, David Blood. The article signaled the launch of their white paper on sustainable capitalism, which set out five broad recommendations. On June 4, 20...

We propose a hybrid approach for estimating beta that shrinks rolling window estimates toward firm-specific priors motivated by economic theory. Our method yields superior forecasts of beta that have important practical implications. First, unlike standard rolling window betas, hybrid betas carry a significant price of risk in the cross-section eve...

We analyze the three components of active management (asset allocation, market timing and security selection) in the net performance of U.S. pension funds and relate these to fund size and the liquidity of the investments. On average, the funds in our sample have an annual net alpha of 89 basis points that is evenly distributed across the asset all...

We study more than 12,000 shareholder proposals that have been filed to S&P1500 companies from 1997-2009 and investigate the determinants of proposal withdrawal. We find that institutional ownership is positively related to proposal withdrawal likelihood. In particular, the ownership of long-term, passively investing institutions and institutional...

This paper investigates how risk preferences influence the relationship between individual investors and mutual fund brokers. We use data from a large mutual fund broker in the Netherlands that cover more than 45,000 investors from 1992-2010. We run a survival analysis on the monthly probability that an investor closes the account at the broker. If...

This article analyzes theoretical studies on environmentally responsible investing, empirical studies on investor behavior, and evidence on the returns of environmentally screened investments. It also explains the implications of the values-driven and profit-seeking movements for practitioners and researchers. Values-driven investors can affect the...

This study adds new insights to the long‐running corporate environmental‐financial performance debate by focusing on the concept of eco‐efficiency. Using a new database of eco‐efficiency scores, we analyse the relation between eco‐efficiency and financial performance from 1997 to 2004. We report that eco‐efficiency relates positively to operating p...

Is there a relation between the asset allocation policy of large pension funds and their liabilities? Does risk-taking behavior vary with the pension fund maturity and chosen discount rates? What is the effect of liabilities structure and duration on the fund performance and liquidity limitations faced by pension funds? Our overall research objecti...

The real estate sector accounts for more than a third of global greenhouse gas emissions and thus offers great potential for carbon abatement. Energy efficient and green buildings are rapidly transforming the commercial property sector, and institutional investors can benefit from that transformation through the value created by the greening of the...

We use a novel method to ex ante determine investors’ decision making type. We collected unique data from two banks that offer socially responsible mutual funds to individuals, which is a useful context for our study. We find that in general, wealthy men mostly chase past returns or minimize management fees and women are more likely to be values-dr...

This study analyzes corporate environmental management and its implications for bond investors. We provide support for the view that the credit standing of borrowing firms is influenced by legal, reputational, and regulatory risks associated with environmental incidents. Using environmental information on 582 U.S. public corporations between 1995 a...

Consistent with theory, this study of shareholder litigation found a broad transformation in company characteristics and risk exposures and generally negative short- and long-term performance effects that differed substantially between two types of allegations. The findings have important implications for both regulator and institutional investor m...

We study shareholder activism through proxy proposals in the United States from 1997-2006. We investigate the determinants for being targeted and the corresponding voting results. By using a distinctive sample that also includes withdrawn and omitted proposals, we circumvent a selection bias towards those proposals that actually go to a vote. We hy...

A direct relationship between the observed investment beliefs held by pension funds and performance measures is tested using an international sample of pension funds. Investment beliefs address strategic choices in the investment philosophy and process that affect the future performance of the fund. Data from over 600 funds between 1992 and 2006 sh...

Using the CEM pension fund data set, we document the cost structure and performance of a large sample of US pension funds. To date, self-reporting biases and a deficiency of comprehensive return and cost data have severely hindered pension fund performance studies. The bias-free CEM dataset resolves these issues and provides detailed information on...

We study socially responsible investor (SRI) clienteles by using a large and unique individual-investor data set. Our purpose is to relax the implicit assumption of many previous studies that socially responsible investors are a homogeneous group. We conduct a comprehensive segmentation analysis based on the proportion of SRI mutual funds in the po...

This study provides European evidence on the ability of static and dynamic specifications of the Fama-French (1993) three-factor model to price 25 size-B/M portfolios. In contrast to US evidence, we detect a small-growth premium and find that the size effect is still present in Europe. Furthermore, we document strong time variation in factor risk l...

Real estate investment trusts (REITs) offer a natural experiment in corporate governance due to the fact that they leave little free cash flow for management, which reduces agency problems. We exploit a unique and leading corporate governance database to test whether corporate governance matters for the performance of U.S. REITs. We document for a...

In this report, we summarize the results of the first global survey on environmental practices in listed property companies and private property funds. The survey is intended to increase industry awareness and provide information on current environmental management practices. Without detailed information on the behavior and environmental performanc...

Does shareholder litigation pay off for investors over long horizons and how much does the type of allegation matter‘ We study whether a disciplining effect occurs for distressed firms and their managers and examine two different groups of allegations. Allegations of violations of duty of loyalty effect individuals only, but duty of care pertains t...

Consistent with the theory that human capital management influences organizational performance and risk, we find that employee relations explain the cross-sectional variation in credit risk. We construct an aggregate measure for the quality of employee relations based on the firm’s engagement in employment practices and policies, and document that...

We construct a panel data model to explain the cross-section of individual stock returns, using monthly data for 1,880 large US firms for 1985-2005. Model specification is geared towards multiple explanatory variables, poolability across industries, alternative forecast horizons, and the effects of unobserved heterogeneity among firms. We find that...

We document the net equity performance of US defined benefit and defined contribution schemes at plan level, using a unique and comprehensive database. Pension fund performance is measured taking into account fund-specific benchmarks and multiple cost components. Pension funds perform close to their benchmarks, whereas size-matched mutual funds str...

We improve both the specification and estimation of firm-specific betas. Time variation in betas is modeled by combining a parametric specification based on economic theory with a non-parametric approach based on data-driven filters. We increase the precision of individual beta estimates by setting up a hierarchical Bayesian panel data model that i...

In this paper we improve both the specification and estimation of firm-specific betas. We model time variation in betas by combining a parametric specification based on economic theory with the robustness of a non-parametric approach based on purely data-driven filters. We increase the accuracy of individual beta estimates by setting up a hierarchi...

This paper examines the impact of option trading on individual investor performance. The results show that most investors incur substantial losses on their option investments, which are much larger than the losses from equity trading. We attribute the detrimental impact of option trading on investor performance to poor market timing that results fr...

We model and experimentally examine the board structure-performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards, and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institut...

Employing a unique data set provided by Governance Metrics International, which rates firms using six different corporate governance dimensions, we analyze whether Japanese firms with many governance provisions have a better corporate performance than firms with few governance provisions. Employing an overall index, we find that well-governed firms...

We characterize the process that drives the market betas of individual stocks by setting up a hierarchical Bayesian panel data model that allows a flexible specification for beta. We show that combining the parametric relationship between betas and conditioning variables specified by economic theory with the robustness of an autoregressive specific...

We examine European corporate governance with respect to the relationship between shareholder value and capital investment. Based upon Europe's largest listed companies, it is shown that Anglo-American conceptions of shareholder value are increasingly important for European firms whatever their home jurisdictions and inherited traditions. Using ann...

We study the cross-section of expected corporate bond returns using an intertemporal CAPM with three factors; innovations in future excess bond returns, future real interest rates and future expected inflation. Our test assets are a broad range of bond market index portfolios of different default categories. We find, using the Fama MacBeth cross-se...

Although the academic interest in ethical mutual fund performance has developed steadily, the evidence to date is mainly sample-specific. To tackle this critique, new research should extend to unexplored countries. Using this as a motivation, we examine the performance and risk sensitivities of Canadian ethical mutual funds vis-à-vis their conventi...

Abstract We document the net equity performance of US deflned beneflt and deflned con- tribution schemes at plan level, using a unique and comprehensive database. Pen- sion fund performance is measured taking into account fund-speciflc benchmarks and multiple cost components. Pension funds perform close to their benchmarks, whereas size-matched mut...

The disappointing performance of value and small cap strategies shows that style consistency may not provide the long-term benefits often assumed in the literature. In this study it is examined whether the short-term variation in the US size and value premium is predictable. Style-timing strategies are documented based on technical and (macro-) eco...

Scandals of corporate governance in the United States and Europe in the aftermath of the TMT bubble captured the public imagination. In play were the interests of senior executives in relation to investors, prompting debate over countries' standards of corporate governance in the global market place. Ahold was (and is) an especially important insta...

The present study investigates the performance of New Zealand mutual funds using a survivorship-bias controlled sample of 143 funds for the period of 1990-2003. Our overall results suggest that New Zealand mutual funds have not been able to provide out-performance. Alphas for equity funds, both domestic and international, are insignificantly differ...

Market valuation of assets is a topic that has been discussed for quite some time now, but the valuation of pension contracts including all embedded options is a major challenge for pension fund policy makers. On top of that, pension fund beneficiaries are increasingly demanding more transparency with regard to the exact nature of their pension arr...

Scandals of corporate governance in the United States and Europe in the aftermath of theTMTbubble captured the public imagination. In play were the interests of senior executives in relation to investors, prompting debate over countries’ standards of corporate governance in the global market place. Ahold was (and is) an especially important instanc...

Does socially responsible investing (SRI) lead to inferior or superior portfolio performance? This study focused on the concept of “eco-efficiency,” which can be thought of as the economic value a company creates relative to the waste it generates, and found that SRI produced superior performance. Based on Innovest Strategic Value Advisors' corpora...

Tourism has been, and still is, a very profitable industry in Spain. But the Spanish model of tourism development, following a pattern set in the 1950s, is now in crisis. The crisis is apparent in the widespread overdevelopment of tourist resorts and residential facilities in coastal areas, generating high environmental, social and economic costs....

This report summarises the scientific content and results of the European Science Foundation Exploratory Workshop on 'Economic Geography and European Finance' held at Jesus College, Oxford University, 16-19 September 2004. The objective of the workshop was to further our understanding of the links between finance and space in the European context,...

Of the events signalling the end of the TMT bubble, scandals of corporate governance in the US and Europe captured the public imagination. In play were the greed and hubris of senior executives prompting further debate over countries' standards of corporate governance. If Enron and WorldCom were the US reference points, Ahold and Parmalat were the...

IS a senior researcher at ABl' Investments in The NcthcrLiiuis. r.niolenaar@abp.nl T raditional portfolio techniques often t:iil in times ot financial stress or instability, when volatilities and cor-relations tend to increase. When it is most needed, the cushioning effect of port-folio diversification on total risk is hii^hly over-stated. When inv...

We model and experimentally examine the board structure-performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards, and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institut...

There exists a widespread consensus among mainstream academics and investors that socially responsible investing (SRI) leads to inferior, rather than superior, portfolio performance. Using Innovest’s well-established corporate ecoefficiency scores, we provide evidence to the contrary. We compose two equity portfolios that differ in eco-efficiency...

Recent research documents that commodities are good diversifiers in traditional investment portfolios: overall portfolio risk is reduced while less than proportional return is sacrificed. These studies generally find a relatively high volatility in commodity returns, which implies a huge potential for tactical strategies. In this paper we investiga...

There exists a widespread consensus among mainstream academics and investors that socially responsible investing (SRI) leads to inferior, rather than superior, portfolio performance. Using Innovest's well-established corporate eco-efficiency scores, we provide evidence to the contrary. We compose two equity portfolios that differ in eco-efficiency...

We study the predictability of stock returns in a panel of individual stocks. Our econometric models can deal with unbalanced panel data, cross sectional correlation among prediction errors and industry specific time effects. We perform misspecification tests related to the cross industry heterogeneity and poolability. For a panel of 1216 US firms...

This study provides new evidence on the performance and investment style of retail ethical funds in Australia. By applying a conditional multi-factor model and after controlling for investment style, time-variation in betas and home bias, we observe no evidence of significant differences in risk-adjusted returns between ethical and conventional fun...

This study examines whether the short-term variation in the Japanese size and value premium is sufficiently predictable to be exploited by a timing strategy. In the spirit of Pesaran and Timmermann [J. Finance 50 (1995) 1201], we employ a dynamic modeling approach in which we explicitly allow for permutations among the determinants in order to miti...

This paper documents the relationship between cross-listing and corporate governance of the largest European companies between 2000 and 2003. Companies with a U.S. cross-listing, and particularly those listed on a U.S. stock exchange had higher corporate governance ratings than companies without a U.S. cross-listing. Corporate governance advantage...