IDEAS home Printed from https://ideas.repec.org/a/eee/corfin/v80y2023ics0929119923000664.html
   My bibliography  Save this article

Corporate socio-political activism and retail investors: Evidence from the Black Lives Matter campaign

Author

Listed:
  • Brownen-Trinh, Ruby
  • Orujov, Ayan

Abstract

This study investigates retail investor responses to corporate engagement in corporate socio-political activism (CSA). Using manually collected evidence of companies' support for the Black Lives Matter (BLM) campaign, we find that speaking up in support of BLM attracts retail investor attention. However, it influences their investment decisions only if speaking up is backed up by a monetary donation to BLM-related causes on the same day. This effect is observed for companies that have black directors on their board and companies headquartered in Democrat-leaning states. There is no corresponding increase in firm value. Our results suggest that retail investor preferences for companies that engage in CSA are likely guided by moral sentiment.

Suggested Citation

  • Brownen-Trinh, Ruby & Orujov, Ayan, 2023. "Corporate socio-political activism and retail investors: Evidence from the Black Lives Matter campaign," Journal of Corporate Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000664
    DOI: 10.1016/j.jcorpfin.2023.102417
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0929119923000664
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcorpfin.2023.102417?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zoran Ivković & Scott Weisbenner, 2005. "Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments," Journal of Finance, American Finance Association, vol. 60(1), pages 267-306, February.
    2. Samuel M. Hartzmark & Abigail B. Sussman, 2019. "Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows," Journal of Finance, American Finance Association, vol. 74(6), pages 2789-2837, December.
    3. Siva K. Balasubramanian & Yiwei Fang & Zihao Yang, 2021. "Twitter Presence and Experience Improve Corporate Social Responsibility Outcomes," Journal of Business Ethics, Springer, vol. 173(4), pages 737-757, November.
    4. Lee, Charles M C & Shleifer, Andrei & Thaler, Richard H, 1991. "Investor Sentiment and the Closed-End Fund Puzzle," Journal of Finance, American Finance Association, vol. 46(1), pages 75-109, March.
    5. Daniel W. Elfenbein & Raymond Fisman & Brian McManus, 2019. "Does Cheap Talk Affect Market Outcomes? Evidence from eBay," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 305-326, October.
    6. Ron Kaniel & Shuming Liu & Gideon Saar & Sheridan Titman, 2012. "Individual Investor Trading and Return Patterns around Earnings Announcements," Journal of Finance, American Finance Association, vol. 67(2), pages 639-680, April.
    7. Neal, Robert & Wheatley, Simon M., 1998. "Do Measures of Investor Sentiment Predict Returns?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(4), pages 523-547, December.
    8. Kiljae Lee & Won-Yong Oh & Namhyeok Kim, 2013. "Social Media for Socially Responsible Firms: Analysis of Fortune 500’s Twitter Profiles and their CSR/CSIR Ratings," Journal of Business Ethics, Springer, vol. 118(4), pages 791-806, December.
    9. Maretno Harjoto & Indrarini Laksmana & Robert Lee, 2015. "Board Diversity and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 132(4), pages 641-660, December.
    10. Bodurtha, James N, Jr & Kim, Dong-Soon & Lee, Charles M C, 1995. "Closed-End Country Funds and U.S. Market Sentiment," Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 879-918.
    11. Henry L. Friedman & Mirko S. Heinle, 2016. "Taste, information, and asset prices: implications for the valuation of CSR," Review of Accounting Studies, Springer, vol. 21(3), pages 740-767, September.
    12. Zhi Da & Joseph Engelberg & Pengjie Gao, 2011. "In Search of Attention," Journal of Finance, American Finance Association, vol. 66(5), pages 1461-1499, October.
    13. Michael S. Drake & Darren T. Roulstone & Jacob R. Thornock, 2012. "Investor Information Demand: Evidence from Google Searches Around Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 50(4), pages 1001-1040, September.
    14. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
    15. Gordon Gemmill & Dylan C. Thomas, 2002. "Noise Trading, Costly Arbitrage, and Asset Prices: Evidence from Closed‐end Funds," Journal of Finance, American Finance Association, vol. 57(6), pages 2571-2594, December.
    16. Seasholes, Mark S. & Wu, Guojun, 2007. "Predictable behavior, profits, and attention," Journal of Empirical Finance, Elsevier, vol. 14(5), pages 590-610, December.
    17. Joshua D. Coval & Tobias J. Moskowitz, 1999. "Home Bias at Home: Local Equity Preference in Domestic Portfolios," Journal of Finance, American Finance Association, vol. 54(6), pages 2045-2073, December.
    18. Vanessa C. Burbano, 2021. "The Demotivating Effects of Communicating a Social-Political Stance: Field Experimental Evidence from an Online Labor Market Platform," Management Science, INFORMS, vol. 67(2), pages 1004-1025, February.
    19. Stephen Bear & Noushi Rahman & Corinne Post, 2010. "The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation," Journal of Business Ethics, Springer, vol. 97(2), pages 207-221, December.
    20. Alhouti, Sarah & Johnson, Catherine M. & Holloway, Betsy Bugg, 2016. "Corporate social responsibility authenticity: Investigating its antecedents and outcomes," Journal of Business Research, Elsevier, vol. 69(3), pages 1242-1249.
    21. Yihui Pan & Elena S. Pikulina & Stephan Siegel & Tracy Yue Wang, 2022. "Do Equity Markets Care about Income Inequality? Evidence from Pay Ratio Disclosure," Journal of Finance, American Finance Association, vol. 77(2), pages 1371-1411, April.
    22. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    23. Wang, Qin & Zhang, Jun, 2015. "Does individual investor trading impact firm valuation?," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 120-135.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qian Chen & Xiang Gao & Jianming Mo & Zhouling Xu, 2022. "Market Reaction to Local Attention around Earnings Announcements in China: Evidence from Internet Search Activity," IJFS, MDPI, vol. 10(4), pages 1-26, October.
    2. Li, Xiao & Shen, Dehua & Xue, Mei & Zhang, Wei, 2017. "Daily happiness and stock returns: The case of Chinese company listed in the United States," Economic Modelling, Elsevier, vol. 64(C), pages 496-501.
    3. Yuan, Ying & Fan, Xiaoqian & Li, Yiou, 2022. "Do local and non-local retail investor attention impact stock returns differently?," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    4. Guomei Tang & Xueyong Zhang, 2021. "Media attention to locations and the cross‐section of stock returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2301-2336, April.
    5. Peter Cziraki & Jordi Mondria & Thomas Wu, 2021. "Asymmetric Attention and Stock Returns," Management Science, INFORMS, vol. 67(1), pages 48-71, January.
    6. Huang, Yuqin & Qiu, Huiyan & Wu, Zhiguo, 2016. "Local bias in investor attention: Evidence from China's Internet stock message boards," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 338-354.
    7. Barber, Brad M. & Odean, Terrance, 2013. "The Behavior of Individual Investors," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1533-1570, Elsevier.
    8. Choi, Sujung & Choi, Woon Youl, 2019. "Effects of limited attention on investors' trading behavior: Evidence from online ranking data," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 273-289.
    9. He, Feng & Yan, Yulin & Hao, Jing & Wu, Ji (George), 2022. "Retail investor attention and corporate green innovation: Evidence from China," Energy Economics, Elsevier, vol. 115(C).
    10. Aissia, Dorsaf Ben, 2016. "Home and foreign investor sentiment and the stock returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 71-77.
    11. Owain Ap Gwilym & Iftekhar Hasan & Qingwei Wang & Ru Xie, 2016. "In Search of Concepts: The Effects of Speculative Demand on Stock Returns," European Financial Management, European Financial Management Association, vol. 22(3), pages 427-449, June.
    12. Chen, Xing & Diao, Xundi & Wu, Chongfeng, 2022. "Heterogeneous investor attention and post earnings announcement drift: Evidence from China," Economic Modelling, Elsevier, vol. 110(C).
    13. Fernando Chague & Bruno Giovannetti & Bernardo Guimaraes, 2021. "The Contrarian Put," Discussion Papers 2106, Centre for Macroeconomics (CFM).
    14. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    15. Gang Chu & John W. Goodell & Dehua Shen & Yongjie Zhang, 2022. "Machine learning to establish proxies for investor attention: evidence of improved stock-return prediction," Annals of Operations Research, Springer, vol. 318(1), pages 103-128, November.
    16. Wu, Ming-Hung & Tsai, Wei-Che & Lu, Chia-Chi & Zhang, Hang, 2022. "Google searches around analyst recommendation revision announcements: Evidence from the Taiwan stock market," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 75-97.
    17. Michael Firth & Kailong (Philip) Wang & Sonia ML Wong, 2015. "Corporate Transparency and the Impact of Investor Sentiment on Stock Prices," Management Science, INFORMS, vol. 61(7), pages 1630-1647, July.
    18. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    19. Bin Wang & Wonseok Choi & Ibrahim Siraj, 2018. "Local investor attention and post-earnings announcement drift," Review of Quantitative Finance and Accounting, Springer, vol. 51(1), pages 219-252, July.
    20. Zhang, Yongjie & Zhang, Yuzhao & Shen, Dehua & Zhang, Wei, 2017. "Investor sentiment and stock returns: Evidence from provincial TV audience rating in China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 466(C), pages 288-294.

    More about this item

    Keywords

    Corporate socio-political activism; Black lives matter; Retail investors; ESG; Corporate social responsibility; Robinhood investors;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000664. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jcorpfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.