Any Consistency in National Culture's Influence on Firm Performance in Bad Times? Evidence from the Covid-19 Crisis and Gfc

Abstract

The COVID-19 economic crisis in 2020 (COVID-19 crisis) and 2007-2009 global financial crisis (GFC) were both worldwide and posed significant challenges for firms. In this study, using Hofstede’s cultural dimension framework to analyze the firm-level data from 55 countries, we show that national culture plays a consistent role for firms in the COVID-19 crisis and GFC: Firms from countries possessing the cultural attributes of long-term orientation, strong uncertainty avoidance, or low individualism are less affected by the crises than their counterparts. We also conduct subsample analyses by firm size, economy development level, and industry. Our analysis reveals that in both crises the culture effect is diminished when firm size increases, and national culture’s relationship with firm downside risk and profitability during crises are more consistent for advanced economies and firms in the manufacturing industry. We conclude that national culture plays an important role in the ability of firms to prosper in the midst of recent major economic downturns.

Keywords: National culture, Economic crisis, Downside risk, Profitability