Corporate Social Responsibility and Financial Performance in Economic Recessions: Evidence from the Covid-19 crisis in Sweden

Abstract: We examine the link between corporate social responsibility (CSR) and corporate financial performance (CFP) during the Covid-19 crisis of 2020. More specifically, we run various regressions to see how stock returns and accounting metrics are affected by CSR-ratings. We present evidence that companies with higher environmental CSR-rating underperform their peers during the first wave of the pandemic in Sweden; a one-standard-deviation increase in pre-crisis environmental CSR is associated with a decrease in the crisis-period return of 7.50 percentage points. The evidence points towards a decrease in sales for these companies, and we draw the conclusion that it is the cultural environment that causes the effect of CSR on CFP.