The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic
73 Pages Posted: 24 Jun 2020
Date Written: June 21, 2020
After fitting a topic model to 79,597 COVID-19-related paragraphs in 11,183 conference calls over the period January to April 2020, we obtain measures of firm-level exposure and response to COVID-19 for 3,019 U.S. firms. We show that despite many different ways through which COVID-19 affects their operations, firms with a strong corporate culture do better in the midst of a pandemic than their peers without a strong culture. Moreover, firms with a strong culture are more likely to emphasize community engagement and adopt digital technology, and are no more likely to engage in cost cutting than their peers without a strong culture. To explore the channels through which culture makes firms resilient to the pandemic, we show that firms with a strong culture have higher sales per employee and lower cost of goods sold per employee during the first quarter of 2020. Our results provide support for the notion that corporate culture is an intangible asset designed to meet unforeseen contingencies as they arise (Kreps 1990).
Keywords: corporate culture, COVID-19, coronavirus, SARS-CoV-2, pandemic, demand, supply chains, employees, community, digital technology, human capital, stock market, machine learning, topic modeling, correlated topic model, textual analysis
JEL Classification: M14, I18, J24, J28, G34
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