Salient Intentions? CEO Ideology-Stance Incongruent Activism and Investor Reactions

Emergent research on CEO sociopolitical activism has begun to explore its impacts on different stakeholders, particularly the contentious debate over whether investors consider it as a profits-deviated or value-enhancing action. However, prior studies have assumed that CEO activism is a behavioral reflection of political ideology and thus represents an authentic action in the eyes of stakeholders. In this study, we theorize that CEO activism stances may be incongruent with their political ideology, which serves as a crucial cue for investors to infer the CEOs’ intentions underlying activism. Specifically, this ideology-stance incongruence provokes the investors’ situational attribution in which CEOs’ intentions underlying their activism is more likely to be ascribed as strategic-oriented rather than self-focused, thus leading to investors’ positive reactions. We further argue that this relationship is stronger when investors perceive fewer agency concerns for CEOs with higher ownership and firms covered by more analysts. We test these predictions using a sample of CEO sociopolitical activism events for S&P 500 firms from 2011 to 2020 and find support for all hypotheses. These results advance our understanding of strategic CEO activism and provide a novel perspective to understand CEO incongruent behavior.