An empirical study on the cushioning effect of corporate social responsibility on the negative impact of COVID-19 on firm performance

Abstract

Embedded in the legitimacy and stakeholder theories in the context of corporate social responsibility (CSR), this study investigates the impact of COVID-19 on firm performance, and the cushioning effect of CSR on the relationship between COVID-19 pandemic and firm performance. The sample covers non-financial firms listed on the Johannesburg Stock Exchange (JSE), South Africa. Data covering the period 2018–2021 were analyzed using multivariate linear fixed-effect regression techniques. COVID-19 has had a negative impact on firm performance, proxied by Tobin's Q and Sales Turnover, while CSR has a positive impact on firm performance. We also found that the negative impact of COVID-19 on firm performance differs between high and low CSR performing firms. Additionally, based on an industry-level analysis, we provide insight into the most affected and most resilient sectors. The findings should motivate more firms to take CSR issues more seriously and adopt such practices as part of their long-term strategic tools to gain competitive advantage and enhance profitability in the long run.