Strategic CEO Activism in Polarized Markets

Abstract

In this paper we show that statements of US CEOs on contentious social issues are not necessarily an expression of their political views. Republican-donor CEOs are three-times more likely to make social statements with a liberal-slant. CEO activism is more likely if firms' operating environment is politically polarized, and employees are Democrat-leaning. Such statements are associated with a 3% increase in consumer visits to a firm's Democrat county stores without significantly reducing them in Republican counties. CEO activism is associated with a 0.12% gain in firm value, increased quarterly sales, and a reduced likelihood of shareholder activism on social issues.