National culture’s influence on firm performance in bad times: Evidence from the COVID-19 crisis and GFC

Both the COVID-19 economic crisis (COVID-19 crisis) and 2007–2009 global financial crisis (GFC) were worldwide events that posed significant challenges for firms. In this study, using Hofstede’s cultural dimension framework to analyze the cross-country, firm-level data from 55 countries, we demonstrate the consistent role of national culture for firms in the COVID-19 crisis and GFC: Firms from countries possessing the cultural attributes of long-term orientation, strong uncertainty avoidance, low individualism, or large power distance are less affected by both crises on downside risk and profitability than their counterparts. We also conduct subsample analyses by firm size, economy development level, and industry. The results show that national culture’s relationship with firm downside risk and profitability during crises is more consistent for advanced economies and firms in the manufacturing industry. The channel analysis shows that capital expenditure is an important mediator, especially during the GFC. We conclude that national culture plays an important role in the ability of firms to endure an economic crisis, and this role remains stable across the two most recent major economic downturns.