Firms’ responses to a black swan macro-crisis: Should they be socially responsible or fiscally conservative?

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The crisis created by the COVID-19 pandemic was unprecedented as it adversely affected everyone and represented a black swan event. Firms implemented marketing strategies to counter its negative effects. Some took a socially responsible approach by making monetary and in-kind contributions to customers, employees, and nonprofits. Others took a fiscally conservative approach by instituting employee pay cuts, layoffs, furloughs, and executive compensation cuts. Considering the magnitude and unique nature of the crisis, there is an important need to determine whether responding to it was financially beneficial, and if so, to identify the superior strategic approach. We therefore conducted an event study of firms that announced new strategies in response to this black swan macro-crisis. We find that investors rewarded agile firms that took swift action. However, investors preferred firms that chose to focus on their own survival by reducing costs and preserving cash flow through fiscally conservative strategies.