The impact of the pre-crisis CSR scores on firm performance during times of crises

: a comparison between the 2008-2009 financial crisis and the Covid-19 market crash

Abstract

The impact of Corporate Social Responsibility (CSR) on firm performance has been widely debated in recent times. This paper examines how the pre-crisis CSR scores impacted stock returns during two distinct crises: the 2008-2009 Financial Crisis and the Covid-19 crisis and it presents a comparative analysis of the results. Empirical evidence reveals that, during both crises, firms with higher CSR scores outperformed those with lower scores in terms of stock performance by at least 0.0010 percentage points in the former crisis and by at least 0.0318 percentage points in the latter. Moreover, the positive impact of pre-crisis CSR scores on Abnormal Returns was found to be greater than that on Raw Returns, during both crises.Additional analyses suggest that, for both crises, the impact of pre-crisis CSR scores on stock returns might be contingent upon the CSR score exceeding a specific threshold and that accounting for the highest-value firms weakened this impact. The study also indicates that trust might be the underlying mechanism explaining the positive impact of pre-crisis CSR scores on stock returns. Besides, the comparative analysis reveals that the impact of pre-crisis CSR scores on firm performance differed between the two crises due to the extent of the impact felt, being greater for the Covid-19 crisis. In conclusion, evidence suggests that, by building trust, pre crisis CSR scores served as a hedging tactic against the detrimental effects of crises.

Date of Award	29 Jun 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Lei Zhao (Supervisor)