Shareholder activism and equity price reactions

•CSR proposals by activist shareholders impact on risk and returns.•Market effects depend on the type of the proposal and the identity of the sponsor.•Sustainability proposals, sponsored by narrow internal groups are penalized.•Equality-ethical proposals, sponsored by elite groups are rewarded.

Using a large dataset of 8,870 shareholder corporate social responsibility (CSR) proposals for US firms, we employ a novel methodological approach that allows for the estimation of dynamic share price and risk reactions. We show that formal activist shareholder recommendations can affect stock returns and risk. However, the direction and magnitude of these effects are conditional upon the nature of the proposal and the identity of the sponsor.