- Date
The Information Mechanism in Corporate Citizenship: Evidence from COVID-19
- Authors
- Lisa Liu, and Shirley Lu
We explore firms' ability to collect, verify, and use information as a mechanism that facilitates the role of companies as powerful corporate citizens who can mitigate societal problems. Specifically, we study whether US firms' business networks with China and Italy are information networks and whether firms use relevant information to mitigate the negative impacts of COVID-19. We first show descriptive evidence that firms with these networks have relevant information about COVID-19. We then document higher stay-at-home ratios in areas with more information-exposure companies before local city governments impose measures, suggesting that firms act on relevant information to safeguard employee health. We find the effects are more pronounced when industries are teleworkable, when regulators have information constraints, and when the information is verifiable or trustworthy. Finally, we show a lower growth in COVID-19 in areas with higher stay-at-home ratios, suggesting a positive impact of firms’ corporate citizenship