CEO Activism and Firm Value

64 Pages Posted: 6 Oct 2020 Last revised: 19 Sep 2023

See all articles by Anahit Mkrtchyan

Anahit Mkrtchyan

University of Massachusetts Amherst - Isenberg School of Management

Jason Sandvik

Eller College of Management, University of Arizona

Vivi Zhu

Tulane University; Southern Methodist University (SMU)

Date Written: March 28, 2023

Abstract

We investigate the increasingly common practice of CEOs taking public stances on social and political issues (CEO activism). We find that CEO activism stems from a CEO’s personal ideology and its alignment with investor, employee, and customer ideologies. We show that CEO activism results in positive market reactions. Furthermore, firms with CEO activism realize increased shareholdings from investors with a greater liberal leaning, who rebalance their portfolios towards these firms. Our results suggest that investors’ socio-political preferences are an important channel through which CEO activism affects equity demand and stock prices. Notably, CEOs are less likely to be fired when their activist stances generate positive market responses.

Keywords: CEO activism, firm value, institutional investors

JEL Classification: G34

Suggested Citation

Mkrtchyan, Anahit and Sandvik, Jason and Zhu, Zhiwei, CEO Activism and Firm Value (March 28, 2023). Available at SSRN: https://ssrn.com/abstract=3699082 or http://dx.doi.org/10.2139/ssrn.3699082

Anahit Mkrtchyan (Contact Author)

University of Massachusetts Amherst - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States

Jason Sandvik

Eller College of Management, University of Arizona ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Zhiwei Zhu

Tulane University ( email )

6823 Saint Charles Avenue
New Orleans, LA
United States

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

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