The COVID-19 pandemic in Korea provides grounds for understanding the effect of corporate social responsibility (CSR) on the stock returns and trading behavior of investors, particularly when most businesses have fallen on hard times. This study empirically finds that CSR reputations are associated with higher returns and lower volatilities by comparing the two portfolios which are composed of CSR and non-CSR firms, respectively. We also discover that public pension funds and other institutional investors have liquidated non-CSR stocks more aggressively than CSR stocks. This indicates that institutional investors consider CSR to transform their stock portfolios into less risky ones.

This article examines the informational content of credit default swap (CDS) net notional for future stock and CDS prices. Using the information on CDS contracts registered in DTCC, a clearinghouse, I construct CDS-to-debt ratios from net notional, that is, the sum of net positive positions of all market participants, and total outstanding debt issued by the reference entity. Unlike the ratio using the sum of all outstanding CDS contracts, this ratio directly indicates how much of debt is insured with CDS and therefore, is a natural measure of investors’ concern on a credit event of the reference entity. Empirically, I find crosssectional evidence that the current increase in CDS-to-debt ratios can predict a decrease in stock prices and an increase in CDS premia of the reference firms in the next week. Greater predictability for firms with investment grade credit ratings or low CDS-to-debt ratios suggests that investors pay more attention to firms in good credit conditions than those regarded as junk or already insured considerably with CDS.