Does corporate activism affect brand equity? an event study on 55 american brands

Abstract

With the rise of corporate activism many have questioned the partaking of companies in political and social debates, and whether such engagement is appropriate. And, maybe more importantly from a managerial perspective, is it harmful or beneficial to the company? This paper adds to the very limited literature on this topic which shows, despite CMOs opposition to such activities, corporate activism is found to enhance brand equity. By investigating the political involvement of 55 American brands from 2012 until today, the paper finds evidence for corporate activism to have a positive impact on a company's brand equity, which, in turn, is reflected through a change in firm value. Further, the results show that the effect is significantly more positive if the statements comes from a CEO relative to the company. The study also adds the dimension of controversy to political engagement, and uncovers that highly controversial corporate activism statements have a negative effect on brand equity.