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Real effects of social trust on firm performance during COVID‐19
Author(s) -
Ramesh Vishnu K.,
Athira A.
Publication year - 2023
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3707
Subject(s) - endogeneity , corporate social responsibility , quarter (canadian coin) , corporate governance , business , sample (material) , covid-19 , natural experiment , accounting , financial crisis , social trust , monetary economics , social responsibility , debt , economics , finance , social capital , econometrics , public relations , macroeconomics , social science , mathematics , history , chemistry , archaeology , pathology , sociology , chromatography , political science , medicine , statistics , disease , infectious disease (medical specialty)
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.