Junkin, Andrew. “Update to The ‘CalPERS Effect’ on Targeted Company Share Prices.” Working paper (Wilshire Associates), September 24, 2013.
From the report: "Wilshire was asked to update the “CalPERS Effect” study on CalPERS engagement efforts as Staff continues monetizing the corporate governance engagement process. This report will be very similar to the longstanding “CalPERS Effect” paper that Wilshire published for a number of years. However, there are some key differences to this study, as will be noted throughout.
"This analysis evaluates CalPERS’ corporate governance effectiveness by measuring the performance of the stocks of the 183 companies targeted by CalPERS from the 1999 engagement process through the 2012 engagement process – fourteen “cohort years”. Unlike the original “CalPERS Effect” study, this analysis examines the performance of all companies engaged – both “Focus List” companies and those that were engaged privately and were never officially named to the “Focus List.”
"Relative performance is measured by examining the total return for targeted companies for the three years preceding CalPERS’ first involvement1, the “initiative date,” and the total return for these same companies for the subsequent five years. This analysis is prepared against two benchmarks: 1) all stocks against the Russell 1000 Index, and 2) each stock against its appropriate Russell 1000 sector index.
"For the three years prior to the “initiative date”, the engaged companies produced returns that averaged 38.87% below the Russell 1000 Index on a cumulative basis, and 35.87% below the respective Russell 1000 sector indices. For the five years after the “initiative date,” the average engaged companies produced excess returns of 13.72% above the Russell 1000 Index and 12.11% above the respective Russell 1000 sector indices on a cumulative basis."