Corporate Resilience During Crisis: The Role of ‘COVID-washing,’ Risk Management, and ESG Factors
Resilience is the ability of an organization to anticipate, prepare for, and respond to sudden disruptions. Using the COVID-19 pandemic as a research context, we study the effects of COVID-related disclosure, risk management, and ESG (Environmental, Social, and Governance) factors on corporate resilience in times of crisis. In this nascent stream of research, it is debatable whether sustainability initiatives immunize stocks against unforeseeable crises during the disruption and immediate aftermath (i.e., ‘new normal’). Analyzing a global sample of firms who disclose about COVID-19 initiatives, our multivariate regression analyses results show that COVID-washing via tone bias increases performance during the disruption period but not in the new normal, suggesting only short-term effectiveness of this impression management strategy. Further, we find that firms with greater ESG risk exposure perform worse during the new normal. We address important knowledge gaps for managers, investors, and other non-financial stakeholders by offering empirical evidence on predictors of corporate resilience and its relationships with COVID-related disclosure, risk management, and ESG.