Stock Market Reactions to Corporate Silence: A Data-Driven Study of Sociopolitical Controversies

Abstract

Increased pressure on corporations to address divisive social issues has raised questions about the financial risks of speaking out versus staying silent. While prior research (e.g., Hersch et al., 2008) finds short-term stock gains from political expression, the market impact of corporate silence remains unclear. This research compares the stock returns of 10 silent companies and 10 vocal companies. In this context, a company is silent if it made no public statements about the bill, and vocal if it publicly opposed the bill—through official statements, social media, or CEO commentary—in a way that aligned with prevailing public sentiment or civil rights concerns. The analysis focuses on three social issues: Trump Travel Ban (2017), Georgia Election Reforms (2021), and Florida Parental Rights in Education Act (2022). Using the event study methodology and a trading-day window of (−2, +6), we calculated the cumulative abnormal returns (CAR) to assess the market's response. Although return differentials between vocal and silent firms are modest, vocal firms more frequently outperformed the S&P 500 during the event window, while silent firms underperformed. These findings suggest that speaking out may shape market perception, albeit in ways moderated by industry context, concurrent news, and broader macroeconomic factors.