Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis
Journal of Finance, Forthcoming
European Corporate Governance Institute (ECGI) - Finance Working Paper No. 446/2015
52 Pages Posted: 28 Jan 2015 Last revised: 17 Oct 2016
There are 2 versions of this paper
Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis
Social Capital, Trust, and Firm Performance During the Financial Crisis
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: Suggested Citation