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Socially Oriented Shareholder Activism Targets: Explaining Activists’ Corporate Target Selection Using Corporate Opportunity Structures

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Abstract

We examine whether and when socially oriented shareholder activists use firms’ corporate social performance (CSP) to identify them as attractive targets for their activism. We build on the research in social movements theory and stakeholder theory to theorize how firms’ engagement with primary and secondary stakeholders reflected in their technical and institutional CSP respectively allows socially oriented shareholder activists to identify targets. We develop a theoretical model by identifying corporate targets’ degree of (1) receptivity to and (2) need to comply with activist demands as two key dimensions of their corporate opportunity structure that explains the variance in firms’ attractiveness as targets for activist demands. We show that a firm’s technical and institutional CSP independently affect the likelihood of activists targeting the firm. We also show that our model has greater explanatory power at firms with high resource slack and from activists not identifying as socially responsible investment funds. Analysis of CSP and shareholder proposals data of 992 U.S. public firms over an 8-year window of observation largely supports our theory.

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Authors and Affiliations

  1. Strategy and Organization Group, Lee Kong Chian School of Business, Singapore Management University, 50 Stamford Road, Stamford, 178899, Singapore

    Abhijith G. Acharya

  2. Department of Management, Haslam College of Business, University of Tennessee, Knoxville, Knoxville, Tennessee, 37996, USA

    David Gras

  3. Management and Leadership Department, Neeley School of Business, Texas Christian University, Fort Worth, Texas, 76109, USA

    Ryan Krause

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  1. Abhijith G. Acharya
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Correspondence to Abhijith G. Acharya or David Gras.

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Acharya, A.G., Gras, D. & Krause, R. Socially Oriented Shareholder Activism Targets: Explaining Activists’ Corporate Target Selection Using Corporate Opportunity Structures. J Bus Ethics 178, 307–323 (2022). https://doi.org/10.1007/s10551-021-04785-5

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