Why Divest? The Political and Informational Roles of Institutions in Asset Stranding

Oct 10, 2025

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We model stakeholder-driven institutional divestiture that promotes harmful-asset stranding through both an economic exposure channel and financial prices. We introduce two novel mechanisms. First, institutional divestiture weakens stakeholders' asset exposures, improving political conditions for stranding. Second, institutional divestiture credibly communicates information about citizen preferences, environmental harm, and economic benefits to financial markets and political participants. These channels drive harmful-asset divestiture, which reduces the asset price and raises its strand probability. Support for divestiture increases under supermajority strand requirements, and when stakeholders internalize aggregate harm. We detail the equilibrium interactions between information, divestiture, prices, and stranding in a dynamic, rational-expectations game.