CEO Activism and Firm Value Anahit Mkrtchyan, Jason Sandvik, Vivi Z. Zhu* January 2021 Abstract We investigate the impact of CEO activism, the increasingly common practice of CEOs speaking out on social and political issues, on firm value. CEO activism may be beneficial for shareholders, as it can bolster firms’ relationships with customers and employees. Alternatively, CEO activism may be detrimental if it alienates stakeholders with opposing views. Consistent with the former, we find that CEO activism results in a positive market reaction and higher valuations. These results can be explained by increased employee productivity and innovation, suggesting that CEO activism may improve corporate reputation in labor markets. Additionally, activist CEOs benefit from more future directorships. Keywords: CEO Activism, firm value, productivity, innovation. JEL Classification Numbers: G34 *Anahit Mkrtchyan is from the D’Amore-McKim School of Business, Northeastern University and can be reached at
[email protected]. Jason Sandvik and Vivi Z. Zhu are from the A. B. Freeman School of Business, Tulane University. Sandvik can be reached at
[email protected] and Zhu can be reached at
[email protected]. We thank John Bai, Jonathan Brogaard, Lucy Chernykh, James Conklin, Felipe Cortes, Laura Field, Davidson Heath, Udi Hoitash, Kate Holland, Peter Iliev, William Kerr, Michelle Lowry, Nadya Malenko, Stijn Van Nieuwerburgh, Yihui Pan, Miriam Schwartz-Ziv, Nathan Seegert, Kandarp Srinivasan, Kuncheng Zheng, and the participants of workshops at Florida State University and Tulane University for their helpful comments. Electronic copy available at: https://ssrn.com/abstract=3699082 1. Introduction Over the last decade, business leaders have increasingly engaged in CEO activism, i.e., the practice of speaking out on hot-button social and political issues.