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Effects of the litigation risk coverage on corporate social responsibility

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  • Sanghak Choi
  • Hail Jung

Abstract

This study investigates the relationship between the law of director liability reduction (DLR) and the level of corporate social responsibility (CSR). Using unique Korean institutional data, we show that firms that do not employ liability reduction coverage engage more heavily in CSR-related activities. This is primarily to control the litigation risk. Firms that have not adopted the DLR are vulnerable to litigation risks, and therefore, they strategically use CSR to hedge such risks. We also employ the propensity score matching approach and show that endogeneity does not drive the result.

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  • Sanghak Choi & Hail Jung, 2021. "Effects of the litigation risk coverage on corporate social responsibility," Applied Economics Letters, Taylor & Francis Journals, vol. 28(21), pages 1836-1841, December.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:21:p:1836-1841
    DOI: 10.1080/13504851.2020.1854443
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    Cited by:

    1. Tsang, Albert & Frost, Tracie & Cao, Huijuan, 2023. "Environmental, Social, and Governance (ESG) disclosure: A literature review," The British Accounting Review, Elsevier, vol. 55(1).
    2. Tarsisius Renald Suganda & Jungmu Kim, 2023. "An Empirical Study on the Relationship between Corporate Social Responsibility and Default Risk: Evidence in Korea," Sustainability, MDPI, vol. 15(4), pages 1-20, February.

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