Corporate Resilience and Response to COVID‐19

Abstract

The global COVID crisis provides a test case for the argument that public companies, by making significant and credible commitments to their stakeholder relationships, signal their resilience to investors and, by so doing, cushion their market values against a general collapse. As one example, by limiting layoffs, providing flexible work schedules, and offering paid sick leave, companies are likely to maintain higher employee productivity and avoid costs associated with excessive employee turnover. And companies that adapt their supply chains quickly to avoid costly production halts and secure the supply of important materials should have stronger relationships that result in both higher quality and lower long‐run costs. Yet another possibility is that companies that temporarily redirect operations to provide needed products and services such as masks and ventilators could experience stronger customer and brand loyalty. Using multiple databases, regressions, matched sample analysis, and measures of media sentiment about particular companies, the authors report that companies exhibiting behavior perceived as strengthening their human capital and supply chain relationships, as well as a willingness to repurpose operations, experienced significantly less negative returns during the crisis. On the basis of this evidence, the authors conclude that a company's response towards its stakeholders can be important in preserving value, and propose that managements view their stakeholder investments as creating strategic resources, intangible assets whose value becomes most apparent during crises.

COVID‐19, ESG investing, and the resilience of more sustainable stocks: Evidence from European firms

“…For instance, Lins et al ( 2017 ) demonstrate that firms with higher social capital, proxied by the firm's corporate social responsibility, show higher stock returns than firms with lower social capital during the last 2007–08 financial crisis. This result is also confirmed by Cornett et al ( 2016 ) and Cheema‐Fox et al ( 2021 ). Albuquerque et al ( 2020 ) show that the better market performance is because firms with higher ESG scores are more resilient to the shocks because of customer and investor loyalty (Albuquerque et al, 2019 ).…”

Exploring the Effectiveness of Sustainability Measurement: Which ESG Metrics Will Survive COVID-19?

“…The large impact of Covid-19 on businesses can be interpreted as a significant driver for stimulating companies during pandemic to implement Corporate Social Responsibility in its real meaning by contributing to society (García-Sánchez & García-Sánchez, 2020 ). The Covid-19 crisis offers a great opportunity for observing differential corporate responses (Schaltegger, 2021 ) and for highlighting companies that are making significant and credible commitments to their stakeholders’ relationships by signaling resilience to investors (Cheema-Fox et al, 2021 ).…”

International taxation sentiment and COVID-19 crisis

“…Moreover, compared with domestic companies, multinational enterprises suffer significantly higher stock price declines during the pandemic period ( Guedhami et al, 2021 ). Cheema-Fox et al (2021) study companies’ heterogeneous responses during COVID-19 and find that a more positive sentiment around a company’s response results in less negative returns for the company.…”