In this article, we show that statements of U.S. CEOs on contentious social issues are not necessarily an expression of their political views.

Republican-donor CEOs are 3× more likely to make social statements with a liberal slant. CEO activism is more likely if firms’ operating environment is politically polarized and employees are Democrat-leaning.

Such statements [2014^–₅2019] are associated with a 3% increase in consumer visits to a firm’s Democrat County stores without statistically-significantly reducing them in Republican counties.

CEO activism is associated with a 0.12% gain in firm value, increased quarterly sales, and a reduced likelihood of shareholder activism on social issues.

…In this article, we provide evidence on the motivations and the short-run economic effects using a large sample of S&P 500 CEOs’ social activism statements 2014^–₅2019 and information on store-level consumer visits. We classify CEOs’ public statements as “social activism” if they comment on gender equality, racial diversity, immigration, gun control, environmental issues, universal healthcare, or human rights and exclude direct political statements addressing a specific political party or a politician. We focus on this set because a recent survey of representative U.S. citizens indicated that they would like CEOs to speak on these issues (Larcker et al 2018). Our final sample consists of 1,188 social statements by CEOs of 196 firms and 187 instances where a CEO has commented on a specific social issue for the first time.

…We show that 1,154 out of 1,188 (or 97%) of the social activism statements align with liberal Democrat ideologies, 34 statements do not have a clear partisan bent, and no statements are aligned with Republican ideologies…Next, we show that 67% of CEOs are Republican donors…In our linear probability models, we find that Republican-donor CEOs are 88% more likely to make social statements than Democrat-donor or neutral CEOs.

…Finally, we estimate the investors’ reaction to a CEO’s social activism from the abnormal returns of the firm’s stock relative to the market portfolio around the date of the CEO’s social statement. We show that the investor response to CEO activism is typically positive: in the 3-day event windows around CEO social activism, the average cumulative abnormal return is 0.12%. We also find heterogeneity in the announcement returns, conditional on firm and CEO characteristics. Abnormal returns to CEO activism are higher for companies operating in polarized environments and when the CEO statements are Democrat-leaning. We also examine firm outcomes related to product, labor, and capital markets. Consistent with our store visits results, we show cross-sectional results that the sales turnover of firms increases in the first two quarters following CEO activism, but the effect subsides thereafter. Furthermore, firms are less likely to face shareholder activism on ESG issues than otherwise similar non-announcing firms. However, we detect no statistically-significant effect of CEO activism on long-term profitability, employee productivity, or employee retention.

…Second, we provide an explanation for the puzzle of the predominantly liberal slant of Republican-donor CEOs’ social statements. The key insight from this article is that consumer reaction to CEO activism is asymmetric. Using granular information from point-of-sale microdata, we show that store visits after CEOs’ social statements increase in Democrat-county stores but do not statistically-significantly fall in Republican-county stores. It is consistent with the experimental evidence that the purchasing intent of value-aligned consumers increases while that of misaligned consumers does not decrease substantially (Chatterji & Toffel2019)

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