Resource allocation in times of need: the role of social commitments

Drawing on the debate over how environmental and social (E&S) commitments help firms withstand economic recessions, this study asks whether, and to what extent, a firm’s E&S performance helps it secure government economic support under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We find that firms committed to greater social responsibility are more likely to gain access to and receive larger amounts of bailout grants and loans. The impact of the social image is more pronounced for firms that would be otherwise disadvantaged in competing for the relief funds. Gaining access to rescue packages enables firms to mitigate corporate default risk and enhance shareholder wealth through improved market liquidity. Overall, the findings support that better ESG performance is among the distinctive attributes that shape government agencies’ scarce resource allocation decisions