Under Attack! CEO Implicit Motives and Firm Competitive Responses Following Short Seller Activism

Abstract

We investigate how CEOs’ implicit motives can shape firms’ competitive intensity in response to external threats. We examine this phenomenon in the context of short seller activism, which occurs when an activist short seller publicly denounces a firm to drive down its stock price. Implicit motives are motivational dispositions that operate outside of an individual’s conscious awareness. We find that CEOs’ implicit needs for achievement and power are associated with a decrease in competitive intensity following short seller activism, implying that implicit motives can lead CEOs to avoid behaviors that they fear may result in failure or the exposure of weakness in the wake of an external threat. This study contributes to research on external threats and corporate governance by highlighting the role of CEOs’ implicit motives in shaping firms’ responses to activists. We emphasize the importance of integrating implicit motives into upper echelons research.