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

Journal of Financial and Quantitative Analysis, Forthcoming

European Corporate Governance Institute – Finance Working Paper No. 726/2021

89 Pages Posted: 24 Jun 2020 Last revised: 28 Aug 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

Tsinghua University - PBC School of Finance

Feng Mai

University of Iowa - Department of Business Analytics

Tengfei Zhang

Rutgers University - Rutgers School of Business-Camden

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, European Corporate Governance Institute – Finance Working Paper No. 726/2021, 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
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HOME PAGE: http://https://sites.google.com/view/kaili/home

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

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Singapore

China Academy of Financial Research (CAFR) ( email )

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European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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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

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing, 100083
China

HOME PAGE: http://www.xing-liu.com/

Feng Mai

University of Iowa - Department of Business Analytics ( email )

Iowa City
United States

Tengfei Zhang (Contact Author)

Rutgers University - Rutgers School of Business-Camden ( email )

227 Penn Street
Camden, NJ 08102
United States

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