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Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis

52 Pages Posted: 28 Jan 2015 Last revised: 17 Oct 2016

Karl V. Lins

University of Utah - Department of Finance

Henri Servaes

London Business School; Centre for Economic Policy Research (CEPR)

Ane Tamayo

London School of Economics & Political Science (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: October 3, 2016

Abstract

During the 2008-2009 financial crisis, firms with high social capital, measured as corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital. High-CSR firms also experienced higher profitability, growth, and sales per employee relative to low-CSR firms, and they raised more debt. This evidence suggests that the trust between the firm and both its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock.

Keywords: trust, social capital, corporate social responsibility, financial crisis, stock returns

JEL Classification: D64, M14, G30

Suggested Citation

Lins, Karl V. and Servaes, Henri and Tamayo, Ane, Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis (October 3, 2016). Journal of Finance, Forthcoming; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 446/2015. Available at SSRN: https://ssrn.com/abstract=2555863

Karl V. Lins (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

Henri Servaes

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7000 8268 (Phone)
+44 20 7000 8201 (Fax)

HOME PAGE: http://faculty.london.edu/hservaes/

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Ane Miren Tamayo

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 (0)20 78494689 (Phone)

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