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Social Capital, Trust, and Firm Performance during the Financial Crisis

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  • Servaes, Henri
  • Tamayo, Ane

Abstract

We study the extent to which a firm?s social capital, as measured by the intensity of a firm?s corporate social responsibility (CSR) activities, affects firm performance during the 2008-2009 financial crisis. We find that high-CSR firms have crisis-period stock returns that are four to five percentage points higher than low-CSR firms, all else equal. In contrast, we find no difference in returns between high- and low-CSR firms either before or after the crisis. During the crisis, high-CSR firms also experience higher profitability, sales growth, and sales per employee and a decline in their accounts receivable relative to low-CSR firms. This evidence is consistent with the view that the trust between the firm and its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock.

Suggested Citation

  • Servaes, Henri & Tamayo, Ane, 2015. "Social Capital, Trust, and Firm Performance during the Financial Crisis," CEPR Discussion Papers 10399, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10399
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    References listed on IDEAS

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    Cited by:

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    3. Dong Wang & Shengli Chen, 2022. "Digital Transformation and Enterprise Resilience: Evidence from China," Sustainability, MDPI, vol. 14(21), pages 1, October.
    4. Trent A. Engbers & Michael F. Thompson & Timothy F. Slaper, 2017. "Theory and Measurement in Social Capital Research," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(2), pages 537-558, June.
    5. Hellen W. Wanyoike & Samuel O. Onyuma & James N. Kung’u, 2021. "Working capital management practices and operational performance of selected supermarkets with national network," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(2), pages 72-85, March.
    6. Tiago Cruz Gonçalves & João Dias & Victor Barros, 2022. "Sustainability Performance and the Cost of Capital," IJFS, MDPI, vol. 10(3), pages 1-32, August.
    7. Ariel H. Fambeu, 2019. "Peer Effect and Environmental Responsibility of Enterprises in a Sub-Saharan African Country," Economics Bulletin, AccessEcon, vol. 39(2), pages 1084-1094.
    8. Sadok El Ghoul & Omrane Guedhami & Hakkon Kim & Kwangwoo Park, 2018. "Corporate Environmental Responsibility and the Cost of Capital: International Evidence," Journal of Business Ethics, Springer, vol. 149(2), pages 335-361, May.
    9. Amir Bastaminia & Omid Fakhraie & Mohammad Alizadeh & Azam Bani Asadi & Maryam Dastoorpoor, 2016. "Social Capital and Quality of Life among University Students of Yasuj, Iran," International Journal of Social Science Studies, Redfame publishing, vol. 4(11), pages 9-18, November.

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    More about this item

    Keywords

    Corporate social responsibility; Financial crisis; Social capital; Trust;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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