Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis
KARL V. LINS, HENRI SERVAES, and ANE TAMAYO.
THE JOURNAL OF FINANCE •
VOL. LXXII, NO. 4 • AUGUST 2017
During the 2008–۲۰۰۹ financial crisis, firms with high social capital,
as measured by corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital.
High-CSR firms also experienced higher profitability, growth, and sales per employee relative to low- CSR firms, and they raised more debt.
This evidence suggests that the trust between a firm and both 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.
“The present financial crisis springs from a catastrophic collapse in confidence . . .
Financial markets hinge on trust, and that trust has eroded.”
—Joseph Stiglitz (2008) “The fundamental problem isn’t lack of capital. It’s lack of trust.
And without trust,
Wall Street might as well fold up its fancy tents.”
—Former U.S. Labor Secretary Robert Reich (2008) Karl V. Lins is at the University of Utah.
Henri Servaes is at London Business School, CEPR, and ECGI.
Ane Tamayo is at the London School of Economics and Political Science (LSE).
The authors have no conflicts of interest to disclose.We would like to thank Taylor Begley, Colin Clubb, Joao Cocco, Mike Cooper, James Dow,
Alex Edmans, Christopher Hennessy, Ioannis Ioannou, Ralph Koijen, Jean-Marie Meier, Yuval Millo, Michael Roberts (the Editor), Kelly Shue, Rui Silva,
Hannes Wagner, Yao Zeng, an anonymous Associate Editor, an anonymous referee, and seminar participants at City University, Erasmus University, ESSEC,
HEC Paris, INSEAD, King’s College, London Business School, London School of Economics, Tilburg University, University of Bristol, University of Edinburgh,
University of Leicester, University of Melbourne, University of New South Wales, University of Southampton, University of Sydney,WHUOtto Beisheim,
the French Finance Association, London Business School Summer Finance Symposium,
the International Accounting Research Symposium at the Fundaci´on Ram´on Areces, the International Corporate Governance Conference at Hong Kong Baptist University,
and the University of Cambridge Financial Accounting Symposium for helpful comments and discussions.
We would also like to thank the ECGI for the 2016 Standard Life Investments FinanceWorking Paper Prize. Dimas Fazio provided excellent research assistance