Should I Fight Back? CEOs’ Ideo-attribution and Firms’ Resistance to Hedge Fund Activism

In answering calls for a more nuanced explanation of the hedge fund activism process, we explore the role of CEOs’ political ideology in determining firms’ response to activists through an ideo-attribution perspective. We argue that target CEOs’ ideology may activate their self-oriented causal attribution given the considerable uncertainty of activism and CEOs’ deep engagement in campaigns. The more liberal (conservative) the target CEOs are, the more likely they attribute the causes of activist campaigns to contextual (dispositional) factors, which leads to the target firms’ higher (lower) level of hostile resistance to activists. Further, the main effect is stronger when firms’ prior-to-campaign performances are better, weaker when activists name and shame the target executives more during campaigns.