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Real effects of social trust on firm performance during COVID‐19

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  • Vishnu K. Ramesh
  • A. Athira

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.

Suggested Citation

  • Vishnu K. Ramesh & A. Athira, 2023. "Real effects of social trust on firm performance during COVID‐19," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 671-693, January.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:1:p:671-693
    DOI: 10.1002/mde.3707
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