CEO Activism and Firm Value

Abstract

We investigate the impact of CEO activism, the increasingly common practice of CEOs speaking out on social/political issues, on firm value. CEO activism may be beneficial for shareholders, as it can bolster firms’ relationships with customers and employees. Alternatively, CEO activism may be detrimental if it alienates stakeholders with opposing views. Consistent with the former, we find that CEO activism results in a positive market reaction and higher valuations. These results can be explained by increased employee productivity and innovation, suggesting that CEO activism may improve corporate reputation in labor markets. Additionally, activist CEOs benefit from more future directorships.

Keywords: CEO Activism, firm value, productivity, innovation

JEL Classification: G34