The role of social capital on corporate social anti-activism and firm stock price: Evidence from DEI program elimination

• CSAA is a rising phenomenon among large, publicly traded U.S.-based firms. • High social capital region firms experience lower returns following CSAA adoption. • Low social capital region firms experience higher returns following CSAA adoption. • CSAA implementation may breach firm-shareholder trust in high social capital regions. • For firms that adopt CSAA, social capital has implications for financial markets. This study empirically investigates the impact of social capital on firm stock price following the adoption of corporate social anti-activism (CSAA). Using CSAA announcements from large, U.S.-based firms and social capital data, we find that firms located in regions with higher levels of social capital experience lower stock returns compared to those in areas with lower social capital. We observe that as social capital rises the effect becomes more pronounced. Our results are robust to alternative and newer measures of social capital. Overall, our study suggests that for firms that adopt CSAA, social capital has implications for financial markets.