The Market (Non)-Reaction to Brand Activism Announcements: Price and Volume Effects

Abstract: Brand activism - defined as a firm, or an individual representing a firm, publicly taking a stance on a divisive social or political issue - is an emerging and increasingly widespread phenomenon. While mainly researched by marketing scholars, given its impact on customer purchase intentions and brand attitudes, brand activism has remained vastly unexplored from an investor perspective. Hence, in this thesis we apply an event study methodology on 279 announcements made by 68 U.S. listed firms in 2020, to examine whether brand activism announcements lead to abnormal returns or abnormal trading volume. We also study whether firm admirability, the brand activism approach, or the social or political issue that is addressed in the announcement, have an impact on any instantaneous abnormal market reaction. We find no evidence that brand activism announcements lead to any immediate abnormal market reaction - neither abnormal returns nor abnormal trading volume.