How Corporate Sociopolitical Activism (CSA) impacts portfolio allocations: an experiment

Abstract

If a firm signals that they identify on one end of the conservative-liberal spectrum, will political affiliation help predict how an investor will allocate their investment dollars to that firm? Using an experimental survey design with 1,494 participants, evidence was found that political affiliation does materially predict the allocation decisions of investors to firms engaged in corporate sociopolitical activism (CSA). More specifically, Democrats were more likely than Republicans to allocate investment dollars towards firms signaling a liberal political identity through their support of LGBT social issues and Planned Parenthood. By comparison, Republicans were more likely than Democrats to allocate investment dollars towards firms signaling a conservative political identity through their support of the Religious Freedom Institute. In addition, evidence was found that both Democrats and Republicans will under-allocate (relative to a control group) to firms that engage in CSA. Corporations should consider the potential costs from investor under-allocation for taking public stands on controversial partisan issues that favor some constituents at the expense of others.