Abstract
Drawing on contract theory, we predict that robust corporate social responsibility (CSR) practices can play a pivotal role in maintaining stakeholder support and safeguarding shareholder values amidst significant financial uncertainties caused by COVID-19 outbreaks. Through empirical tests centered on the January 2020 outbreak in China, we investigate whether pre-pandemic CSR performance influences firm resilience during the crisis. Results show high-CSR firms experienced moderate stock gains, while low-CSR firms faced significant losses around the Wuhan lockdown. Controlled models affirm a positive link between CSR ratings and abnormal stock returns during the outbreak, especially for firms in heavily affected regions and competitive industries. In line with contract theory, our findings underscore how strong pre-pandemic CSR enhances profitability and mitigates uncertainty across operations, supply chains, and demand fluctuations.
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