COVID-19 Human Capital Management Response and Firm Value

We examine whether corporate human capital management responses to the COVID-19 pandemic (COVIDHCM) have implications for firm value. We exploit newly mandated SEC human capital disclosures in 10-K filings to measure COVIDHCM investments. To validate our measure, we first show that our COVIDHCM measure is positively associated with how favorably employees view the firm's pandemic response. We then examine the association between COVIDHCM investment and firm value. We find favorable COVIDHCM investment valuation effects appear only as financial flexibility increases. Financial flexibility pertains to the firm's cash balance at the onset of the pandemic and captures resources that can facilitate investment during the pandemic. We also find that as financial flexibility increases, COVIDHCM investment is positively associated with overall employee satisfaction and employee productivity. Overall, the results suggest firm actions to protect employees' welfare were value enhancing during the global pandemic, but only for firms with sufficient financial flexibility.