Who Gets Attention? Firms’ Shifting Stakeholder Orientation at Times of Ownership Volatility

Research on firms’ stakeholder orientation has described two perspectives: An ex ante narrow orientation towards their shareholders and an ex ante broad orientation towards all their stakeholders. Both streams rely on the assumption of long-term owners, who create spillovers to other stakeholders or enable synergies between stakeholders and shareholders. However, stock-holding periods have become much shorter over the past decades, causing unprecedented ownership volatility. In this paper, we clarify the impact of ownership volatility on stakeholder orientation. Drawing on an attention perspective, we argue that two distinct mechanisms are at play: First, an increase in ownership volatility attracts managers’ short-term situated attention, leading to a narrow orientation to shareholders. Second, a constantly high level of ownership volatility affects managers’ long-term focus of attention, motivating a broad stakeholder orientation. Based on an empirical study of more than 1,300 firms, we find evidence for our arguments. Our main theoretical contribution is that firms’ stakeholder orientation is not set ex ante, but changes over time with ownership volatility.