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Managers’ Cultural Origin and Corporate Response and Resilience to the COVID-19 Pandemic

We exploit the exogenous COVID-19 shock in a bicultural area to identify cultural differences in corporate responses and resilience to the pandemic. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in terms of how they allocate investments, and have different operational responses to the shock. These findings are consistent with cultural differences in time preferences and debt aversion. In addition, cultures assigning higher stigma to bankruptcy are less likely to liquidate their firms. Overall, our results show that the cultural origin of managers significantly affects firms’ responses to economic shocks.