Does the COVID-19 pandemic reward firms performing better on corporate social matters?

The causes and consequences of social dimension of business practices have been usually neglected by accounting scholars. To date the evidence about the relationship between corporate social performance (CSP) and corporate and financial performance (CFP) is still mixed and sometimes contradictory. Therefore, the aim of this study is to examine whether the CSP is significantly associated with market-based CFP in the context of European listed non-financial firms in 2017-2022. Specifically, since the COVID-19 pandemic deeply influenced corporate behavior, emphasized the importance of social dimension of human life and shaken the international economic balances, this study aims to further investigate the moderating role of the COVID-19 pandemic in the relationship between CSP and market-based CFP. The research hypotheses, grounded on multiple theoretical perspectives, such as the stakeholders and the shareholders theory, are tested through fixed-effects regression models on a sample of 743 European listed non-financial firms. While the results demonstrate that CSP is negatively associated to CFP, they also show that such relationship turns positive during the COVID-19 pandemic, suggesting that the pan-demic has strongly influenced the market responses to corporate social commitment. Coherently with such inference, our further analyses show that this positive relationship is stronger in indus-tries particularly affected by the COVID-19 pandemic as compared to less COVID 19-sensitive sectors. Overall, this research has theoretical and practical contributions for academic communities, policymakers, and practitioners.