A study by four professors of marketing analyzed the reaction of investors to 293 "corporate sociopolitical activism" (CSA) events initiated by 149 firms across 39 industries.
Key findings
- The study found that, on average, corporate activism elicits an adverse reaction from investors.
- Investors evaluate corporate activism as a signal of a firm’s allocation of resources away from profit-oriented objectives and toward a risky activity with uncertain outcomes.
- Critically, corporate activism never elicits a positive investor response when it deviates from customers’ values.
Takeaways
- The study concedes that if managers are deeply committed to activism and it aligns with their strategic objectives (i.e., acquiring a more liberal or conservative customer base), activism’s potential benefits may be worth an intensified negative response from investors.
- However, it warns that if managers are uncertain about activism’s role in their firm’s future strategic priorities or they are sensitive to investor responses, they should choose a more moderate approach to engaging in activism.
- In summary, this study concludes that social activism is a risky firm activity that managers must carefully consider before implementing.
