CEO Ideologically (In)Congruent Activism and Investor Reactions: An Attribution of CEO Intentions Perspective

Abstract The phenomenon of chief executive officers (CEOs) taking activism stances on contested sociopolitical issues is increasing, yet it remains unclear how observing investors discern CEO intentions behind activism engagements, thereby shaping their judgments and subsequent reactions. By relaxing the assumption that CEO activism is an unabashed expression of personal beliefs, we propose the concept of CEO ideologically (in)congruent activism and develop a framework wherein investors may attribute CEO intentions underlying incongruent (versus congruent) activism engagements as more organization‐driven (versus self‐driven) interest pursuits, thereby leading to more positive investor evaluations and reactions. Furthermore, we argue that the positive effect of CEO ideologically incongruent activism on investor reactions will be amplified when the CEO owns a higher level of stock ownership but weakened when the firm receives a greater corporate social responsibility (CSR) rating. We corroborate our propositions using a sample of CEO activism events for S&P 500 firms from 2012 to 2021. Our findings demonstrate the heterogeneity and critical influence of CEO intentions behind activism engagements and shed light on how investors integrate multi‐informational cues when evaluating and reacting to managerial incongruent behaviours.