The value of social capital in coronavirus shock

Abstract

This study investigates the value of corporate social capital on stock price crash risk during the COVID-19. To achieve this goal, we use corporate reputation survey data using a large business card exchange network in Japan as a proxy variable for social capital. The survey data is unique in that it is based on a direct and holistic assessment of the company by its business card holders, and the survey covers cross-sectoral over 800 Japanese companies. The empirical findings reveal that companies with high social capital, those with a good reputation for the use of their products to society, earned higher returns during the COVID-19 crisis. This evidence suggests that social capital can serve as insurance against shocks during economic crises. In particular, during the COVID-19 crisis, the impression that the company's products are useful to society was found to have a positive effect on shock mitigation.