Companies Taking a Stand: The Effect of Corporate Activism on Wall Street

Abstract

Some companies have begun to take a stand on controversial social and political issues. These initiatives, which are defined as ‘corporate activism’, are part of a complex context that is characterised by distrust in public institutions and governments. This article analyses the impact of corporate activism on the financial returns of companies that have implemented it. Our contribution to the empirical research of corporate activism is to identify two variables not previously studied that have an influence on whether that impact is positive or negative. To this end, a wide sample of corporate activism cases were analysed using an event analysis approach to identify the effect of two key variables: (a) the controversial nature of the sector and (b) the type of activism. The results show that corporate activism actions have positive effects when the sector is not perceived as controversial, and negative when the type of activism is based on social rights. The findings provide managerial implications for marketing professionals and broaden the possibilities of corporate activism as long-term strategy.