Employee treatment is an important but challenging element of corporate environmental, social, and governance policies. Satisfying employee needs can increase corporate productivity, but is also costly to shareholders. Using unique data of Chinese publicly listed firms, we show that having satisfied employees is valuable to the firm. Specifically, firms with higher employee satisfaction scores withstand COVID-19 better, in terms of stock market performance. Such an effect is more pronounced for firms with more intangible assets and in knowledge-based industries. Moreover, higher employee satisfaction scores predict better operating performance. While not fully revealed in tranquil times, the effect of employee satisfaction is materialized when the firms experience negative shocks, such as COVID-19. Our findings suggest that firms can do well in crisis periods by doing good in normal times.

We study the impact of an urban land titling program on firm investment in Shenzhen, China. We find that this program increased the investment rate for titling firms, but this positive effect only holds for politically connected firms. Further analysis suggests that the titling effect is more pronounced for those titling firms associated with greater expropriation risk. During program implementation, the connected titling firms increased their investment perhaps because, as observed, they experienced fewer disputes than non-connected titling firms.

While credit default swaps (CDSs) can be used to hedge credit risk exposures or to speculate, we examine another use of them: banks buy CDS referencing their borrowers to obtain regulatory capital relief. Such capital relief activities have unintended consequences, as banks extend riskier loans when they buy CDS to boost capital ratios. While capital-induced CDS-user banks achieve higher profitability during normal times, they perform worse and request more government support in crisis periods than other banks that use CDS for trading or speculation. Our findings suggest that banks’ CDS trading for capital relief purposes may make these banks riskier.