Customer relationships, corporate social responsibility, and stock price reaction: Lessons from China during health crisis times

ABSTRACT

This paper studies the effect of corporate social responsibility (CSR) and customer relationships on the stock price during the COVID-19 pandemic. The empirical results show that CSR practices improve firms’ resilience to the negative health crisis shocks. The functional principal component analysis helps display the relationship between CSR and cumulative abnormal returns (CAR). It shows that CSR practices improve customers’ cooperation willingness. Customers of high-CSR firms pay invoices faster during the crisis, which results in less increment of accounts receivable. Hence, high-CSR firms gain more cash support from their customers to overcome the COVID-19 pandemic, resulting in higher cumulative abnormal returns.