Real effects of social trust on firm performance during COVID-19 |
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Authors: | Vishnu K. Ramesh A. Athira |
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Affiliation: | 1. Indian Institute of Management Rohtak, Rohtak, India;2. Indian Institute of Management Kozhikode, Kozhikode, India |
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Abstract: | This study uses a difference-in-differences estimation method to address potential endogeneity between corporate social responsibility (CSR) and firm performance using a natural experiment of COVID-19, with a cross-country sample of 80,454 firm-quarter observations across 51 countries. We find that high-CSR firms show better performance, raise more debt, and invest more during COVID-19. The positive effect of CSR on firm performance is more pronounced in countries with better governance and among non- International Financial Reporting Standards adopters. Our findings suggest that when trust in firms and markets falls during an economic crisis, the trust established between a firm and its stakeholders via socially responsible behavior pays off. |
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