I am Not One of Them! Hedge Fund Activism, Gender Stereotype Threat, and CSR Disengagement

Recent research has shown that female-led (versus male-led) companies are more likely to be targeted by hedge fund activism (HFA), but little is known about whether and how HFA will generate differential impacts on firms led by female versus male CEOs. Building on stereotype threat theory, we argue and corroborate that after being targeted by HFA, firms led by female (but not male) CEOs will experience a sharp decline in corporate social responsibility (CSR) activities. This is because HFA can present a significant stereotype threat to female (but not male) CEOs regarding their leadership competence. As a result, female CEOs are likely to reduce the firms’ engagement in CSR activities, an often female-typed domain, to detach themselves from gender stereotypes. We further find support for three key boundary conditions that shape female CEOs’ perceived stereotype threat, thereby moderating the impact of HFA on the CSR disengagement of female-led firms. Our study contributes to research on investor activism and female executive leadership by shedding light on the differential impacts of HFA on female- versus male-led firms, as well as providing a new vantage point to explain the consequences of HFA on firms’ CSR activities.