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

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

Lins, Karl V. and Servaes, Henri and Tamayo, Ane Miren, 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 or http://dx.doi.org/10.2139/ssrn.2555863