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Responses to CEO Activism
Last registered on August 23, 2020

Pre-Trial

Trial Information
General Information
Title
Responses to CEO Activism
RCT ID
AEARCTR-0006303
Initial registration date
August 17, 2020
Last updated
August 23, 2020 10:44 AM EDT
Location(s)
Region
Primary Investigator
Affiliation
Tulane University
Other Primary Investigator(s)
Additional Trial Information
Status
In development
Start date
2020-08-23
End date
2020-08-27
Secondary IDs
Abstract
We investigate the impact of CEO activism, the increasingly more common practice of CEOs speaking out on controversial social and political issues, on firm value. CEO activism may be beneficial for shareholders, as it can bolster firms' relationships with customers and employees. Alternatively, CEO activism may be detrimental to firm value if it alienates important stakeholders with opposing views. Consistent with the former, we find that CEO activism results in a positive market reaction and higher valuations. Firms with CEO activism have higher sales, exhibit higher employee productivity, and innovate more. Additionally, activist CEOs are rewarded with more directorships and a reduced likelihood of turnover.
External Link(s)
Registration Citation
Citation
Sandvik, Jason. 2020. "Responses to CEO Activism." AEA RCT Registry. August 23. https://doi.org/10.1257/rct.6303-1.1.
Experimental Details
Interventions
Intervention(s)
We will recruit our experiment participants from Amazon Mechanical Turk. To qualify for the study, participants have to provide satisfactory responses to a screening survey, which will ask about their experience on the platform, their experience making investment decisions, and their understanding of corporate decision-making. We will adhere to the current best practices to ensure our sample contains only high-quality participants. From the screening survey, approximately 900 participants will be invited to participate in the randomized controlled trial.

The experimental design of the randomized controlled trial will be as follows. Each participant will be told that they are either (i) a mutual fund manager who is deciding whether to buy the stock of Firm A, (ii) a customer who is deciding whether to purchase a hi-tech television from Firm A, or (iii) a potential employee of Firm A who is on the job market (300 participants will be placed in each bin). Each is given the same information about Firm A's past stock return performance. Within each group of participants, one third of the participants will be given no additional information about the company and will be asked the extent to which they want to (i) invest in the firm, (ii) purchase a television from the firm, or (iii) pursue employment with the firm. They will respond using a 100-point slider scale. Another third of the participants will be told that it has become increasingly common for CEOs to take a public stance on social issues (CEO activism), and then they will be told that the CEO of Firm A regularly engages in CEO activism. They will then be asked the extent to which they want to (i) invest in the firm, (ii) purchase a television from the firm, or (iii) pursue employment with the firm. The last third of the participants in each group will be told that it has become increasingly common for CEOs to take a public stance on social issues (CEO activism), and then they will be told the CEO of Firm A avoids engaging in CEO activism. They will then be asked the extent to which they want to (i) invest in the firm, (ii) purchase a television from the firm, or (iii) pursue employment with the firm.

After each participant makes their decision, we will then ask them several follow-up questions to provide insight into the effect of CEO activism on other stakeholders. Answers will be given on a 7-point Likert scale from “Strongly Disagree” to “Strongly Agree.”
Intervention Start Date
2020-08-23
Intervention End Date
2020-08-27
Primary Outcomes
Primary Outcomes (end points)
Responses to questions about the extent to which participants want to (i) invest in the firm, (ii) purchase goods from the firm, or (iii) pursue employment with the firm.
Primary Outcomes (explanation)
These responses will complement the archival analysis we have already done. In are archival analysis, we use stock return data and long-term firm performance data to measure investors' willingness to invest after CEO activism events, and we use various proxies to capture customer and employee responses to CEO activism. There may be selection issues in our setting, some of which we are not able to control for using various econometric techniques, so an experimental approach allows us to impose exogenous variation to study the relation between CEO activism and stakeholder responses.
Secondary Outcomes
Secondary Outcomes (end points)
Responses to questions about what factors influenced the particpants' decisions.
Secondary Outcomes (explanation)
We will be able to compare these responses to the response of individuals who take on the role of customers and employees. This will help us understand the mechanisms behind an institutional investor's decision-making.
Experimental Design
Experimental Design
We will recruit our experiment participants from Amazon Mechanical Turk. To qualify for the study, participants have to provide satisfactory responses to a screening survey, which will ask about their experience on the platform, their experience making investment decisions, and their understanding of corporate decision-making. We will adhere to the current best practices to ensure our sample contains only high-quality participants. From the screening survey, approximately 900 participants will be invited to participate in the randomized controlled trial.

The experimental design of the randomized controlled trial will be as follows. Each participant will be told that they are either (i) a mutual fund manager who is deciding whether to buy the stock of Firm A, (ii) a customer who is deciding whether to purchase a hi-tech television from Firm A, or (iii) a potential employee of Firm A who is on the job market (300 participants will be placed in each bin). Each is given the same information about Firm A's past stock return performance. Within each group of participants, one third of the participants will be given no additional information about the company and will be asked the extent to which they want to (i) invest in the firm, (ii) purchase a television from the firm, or (iii) pursue employment with the firm. They will respond using a 100-point slider scale. Another third of the participants will be told that it has become increasingly common for CEOs to take a public stance on social issues (CEO activism), and then they will be told that the CEO of Firm A regularly engages in CEO activism. They will then be asked the extent to which they want to (i) invest in the firm, (ii) purchase a television from the firm, or (iii) pursue employment with the firm. The last third of the participants in each group will be told that it has become increasingly common for CEOs to take a public stance on social issues (CEO activism), and then they will be told the CEO of Firm A avoids engaging in CEO activism. They will then be asked the extent to which they want to (i) invest in the firm, (ii) purchase a television from the firm, or (iii) pursue employment with the firm.

After each participant makes their decision, we will then ask them several follow-up questions to provide insight into the effect of CEO activism on other stakeholders. Answers will be given on a 7-point Likert scale from “Strongly Disagree” to “Strongly Agree.”
Experimental Design Details
Randomization Method
Randomization into one of the nine treatment cells (3 x 3) at the individual level. Participants work independently from each other and are very unlikely to communicate or be influenced by one another in any way. The randomization will be done automatically through Qualtrics.
Randomization Unit
Individual experiment participant
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
450-900 individual participants
Sample size: planned number of observations
450-900 individual participants
Sample size (or number of clusters) by treatment arms
50-100 individual participants in each of the 9 treatment arms (3 x 3 design)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
Documents
Document Name
Experimental Survey Draft
Document Type
survey_instrument
Document Description
This document shows the questions we will ask participants. There are nine possible treatments. Then all participants will be asked the final question at the bottom of the survey.
File
Experimental Survey Draft

MD5: 8a0aca9ffae6b92fb66a999d6f886b5c

SHA1: a7673f43e697d7608f87f866708ebf7ae2ea079c

Uploaded At: August 23, 2020

IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
Tulane University Human Research Protection Program
IRB Approval Date
2020-08-06
IRB Approval Number
2020-1075
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports, Papers & Other Materials
Relevant Paper(s)
REPORTS & OTHER MATERIALS