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

73 Pages Posted: 24 Jun 2020

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

Xing Liu

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

Feng Mai

Stevens Institute of Technology

Tengfei Zhang

Louisiana State University, Baton Rouge

Date Written: June 21, 2020

Abstract

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

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 (June 21, 2020). Available at SSRN: https://ssrn.com/abstract=3632395 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)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~kaili

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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, Baton Rouge ( 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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