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

Publication Type : Journal Article

Source : Managerial and Decision Economics

Campus : Bengaluru

School : School of Business

Year : 2023

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.

Cite this Research Publication : Ramesh, V. K., & Athira, A. (2023). Real effects of social trust on firm performance during COVID‐19. Managerial and Decision Economics, 44(1), 671-693.

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