Dr Kai Li, Senior Associate Dean, Equity and Diversity, Professor of Finance, and W. Maurice Young Endowed Chair in Finance, UBC Sauder School of Business, University of British Columbia
After fitting a topic model to 40,927 COVID-19-related paragraphs in 3,581 earnings calls over the period 22 January to 30 April 2020, we obtain measures of firm-level exposure and response to COVID-19 for 2,894 US firms. We show that despite large negative impacts of COVID-19 on 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 support their community, embrace digital transformation, and develop new products, whereas are no more likely to cut costs, 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 fiscal quarter since the pandemic hit. Our results support the notion that corporate culture is an intangible asset designed to meet unforeseen contingencies as they arise (Kreps 1990).