HomRoy, Swarnodeep, All That Is Left to Say: Why Are CEOs Speaking on Social Issues? (June 01, 2020). Available at SSRN: https://ssrn.com/abstract=3622605
Abstract: CEO social activism is increasingly common, but little is known about the motivations and the economic consequences. In this paper, I show that CEO social activism is linked to political polarisation in the US. Social activism is concentrated in states with higher within state political polarisation. I show that Republican-donor CEOs are 88% more likely to speak on social issues with a Democrat-slant. Using a sample of CEO activism events from 2014-2019, I find that CEO activism is associated with a 1.3% increase in firm value and a short-term increase in sales in the next quarter. The gain in firm value and growth in sales are higher for firms selling consumer goods and in highly competitive industries. These results suggest that CEO social activism is motivated by strategic reasons.
