Strategic CEO Activism in Polarized Markets

61 Pages Posted: 1 Jul 2020 Last revised: 2 Jul 2021

See all articles by Shubhashis Gangopadhyay

Shubhashis Gangopadhyay

India Development Foundation; University of Gothenburg; University of Groningen, Faculty of Economics and Business, Students; Indian School of Public Policy

Swarnodeep HomRoy

University of Groningen

Date Written: June 1, 2020

Abstract

CEOs are increasingly speaking on social issues, but little is known about their motivations and economic consequences. Both within a theoretical model and empirically, we show that CEO social activism is more common in firms with a greater share of operations in US states with high political polarization among consumers, and Republican-donor CEOs are more likely to support liberal causes. CEO social activism increases firm value by 1.3 percent and profitability by 3 percent. We establish sales turnover as a channel through which firms profit from CEO social activism. Corporate decisions that appear stakeholder-driven can ultimately benefit shareholders.

Keywords: CEO Activism, Political Contributions, Corporate Strategy, Firm Value, Strategic Extremism

JEL Classification: D21, D82, G32, L21

Suggested Citation

Gangopadhyay, Shubhashis and HomRoy, Swarnodeep, Strategic CEO Activism in Polarized Markets (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=3622605 or http://dx.doi.org/10.2139/ssrn.3622605

Shubhashis Gangopadhyay

India Development Foundation ( email )

4101 DLF Phase IV
Gurugram, Haryana 122002
India
+91 9910991221 (Phone)

University of Gothenburg

Gothenburg
Sweden

University of Groningen, Faculty of Economics and Business, Students

Postbus 72
9700 AB Groningen
Netherlands

Indian School of Public Policy

Delhi
India

Swarnodeep HomRoy (Contact Author)

University of Groningen ( email )

Nettlebosje 2
Department of Economics, Econometrics and Finance
Groningen, Groningen 9747 AE
Netherlands

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