CEO Activism and Firm Value

Abstract

We investigate the impact of CEO activism, the increasingly common practice of CEOs speaking out on social and political issues, on firm value. CEO activism may be beneficial for shareholders, as it can bolster firms’ relationships with employees and customers. Alternatively, CEO activism may be detrimental if it alienates stakeholders with opposing views. Consistent with the former, we find that CEO activism results in positive market reactions and higher valuations. These results can be explained by increased employee productivity, greater innovation, and a reduced likelihood of employee-related litigation. Notably, activist CEOs are less likely to be fired and benefit from more future directorships.

Keywords: CEO Activism, firm value, productivity, innovation

JEL Classification: G34