Customer orientation and stock resilience during adversity periods

Customer orientation reflects the organizational culture and climate that promote behaviors enabling the firm to create superior value for its customers. Using a textual measure of customer orientation ($Custor$) constructed from 10-K filings, we document a positive and economically significant relation between $Custor$ and stock returns in the financial crisis of 2008–2009 and the COVID-19 pandemic. High-$Custor$ firms outperform low-$Custor$ firms by 1.5% per month during the financial crisis and by 4.7% per month during the COVID-19 crisis. This positive $Custor$-returns relation is robust to different treatments and persists after accounting for factors that contribute to corporate resilience, such as $CSR$ activities. Our findings lend credence to the notion that customer orientation enhances a firm’s social capital, leading to improved operational performance during adverse periods, whilst our empirical evidence further supports that $Custor$ and $CSR$ represent distinct pathways for building trust. Consequently, firms that prioritize customer orientation experience greater resilience to negative shocks, especially during periods of low market confidence.