To woke or not: Corporate woke engagement and financial outcomes

Abstract

This paper develops a novel approach to capture corporate social activism via corporate woke engagement (CWE) by measuring its disclosure in 10-K filings of publicly listed U.S. firms between 2008 and 2023. CWE disclosure has surged significantly since 2020 and is more prevalent among firms that emphasize integrity, respect, teamwork, and innovation as cultural values. Firms with greater CWE disclosure intensity exhibit higher labor investment efficiency, suggesting that CWE matters for hiring practices. This positive impact weakens by two thirds in firms identified as woke washers, suggesting that CWE does not translate into real economic benefits when not sufficiently accompanied by genuine improvements in social performance. Our further analysis shows that the positive effect of CWE does not extend to broader improvement in firm performance in terms of stock returns. Our findings underscore the growing significance of CWE in contemporary corporate America