Organization Capital and Firm Resilience to Cash Flow Shocks

Spanning a 3-year window before and after the COVID-19 pandemic (2017–2022), this study examines the role of organizational capital in shaping firm resilience to cash flow shocks. We find that organizational capital significantly mitigates adverse cash flow impacts arising from pandemic-related operational disruptions. The superior post-COVID cash flow performance of firms with high organizational capital is driven by more extensive use of trade credit, cost-reduction strategies, and greater operational efficiency. We further show that the effectiveness of organizational capital is context-dependent, becoming more pronounced in regions with strong public health measures and supportive household and labor market policies. Additional analyses reveal that the positive impact of organizational capital is especially strong among young firms, small firms, and those with high governance quality. Together, our findings highlight the critical role of organizational capital in enhancing firm resilience during periods of severe economic uncertainty, offering valuable insights for managers, policymakers, and investors.