The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic

Journal of Financial and Quantitative Analysis, Forthcoming

83 Pages Posted: 24 Jun 2020 Last revised: 22 Jul 2021

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR); European Corporate Governance Institute (ECGI); Canadian Sustainable Finance Network (CSFN)

Xing Liu

University of British Columbia (UBC) - Sauder School of Business

Feng Mai

Stevens Institute of Technology

Tengfei Zhang

Louisiana State University

Date Written: July 22, 2021

Abstract

After fitting a topic model to 40,927 COVID-19-related paragraphs in 3,581 earnings calls over the period January 22 to April 30, 2020, we obtain firm-level measures of exposure and response related to COVID-19 for 2,894 U.S. firms. We show that despite the large negative impact of COVID-19 on their operations, firms with a strong corporate culture outperform their peers without a strong culture. Moreover, these firms are more likely to support their community, embrace digital transformation, and develop new products than those peers. We conclude that corporate culture is an intangible asset designed to meet unforeseen contingencies as they arise.

Keywords: corporate culture; COVID-19; pandemic; demand; supply chain; employees; community; digital transformation; new product development; human capital; machine learning; topic modelling; correlated topic model

JEL Classification: M14, I18, J24, J28

Suggested Citation

Li, Kai and Liu, Xing and Mai, Feng and Zhang, Tengfei, The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic (July 22, 2021). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract= or http://dx.doi.org/10.2139/ssrn.3632395

Kai Li

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
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HOME PAGE: http://finance.sauder.ubc.ca/~kaili

Asian Bureau of Finance and Economic Research (ABFER) ( email )

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Singapore

China Academy of Financial Research (CAFR)

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European Corporate Governance Institute (ECGI) ( email )

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Belgium

Canadian Sustainable Finance Network (CSFN) ( email )

Queens University
Kingston, ON
Canada

HOME PAGE: http://https://smith.queensu.ca/centres/isf/research/network.php

Xing Liu

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Feng Mai

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

Tengfei Zhang (Contact Author)

Louisiana State University ( email )

2900 Business Education Complex
501South Quad Drive
Baton Rouge, LA 70803
United States

HOME PAGE: http://sites.google.com/view/tengfeizhang/home

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