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

Kai Li, Xing Liu, Feng Mai and Tengfei Zhang
SSRN
06/24/2020
DOI: 10.2139/ssrn.3632395
url
https://doi.org/ 10.1017/S0022109021000326View
Published (Version of record)This article has now been published in a journal and has been peer-reviewed by subject experts. This version may differ significantly from the preprint version. Access restricted to faculty, staff and students
url
https://doi.org/10.2139/ssrn.3632395View
Preprint (Author's original)This preprint has not been evaluated by subject experts through peer review. Preprints may undergo extensive changes and/or become peer-reviewed journal articles. Open Access

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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)

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