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Who Values Corporate Social Responsibility in the Korean Stock Market?

Author

Listed:
  • Sangki Lee

    () (School of Business Administration, Soongsil University, 369 Sangdo-ro, Dongjak-gu, Seoul 06978, Korea)

  • Insu Kim

    () (College of Business Administration, Kookmin University, 77, Jeongneung-ro, Seongbuk-gu, Seoul 02707, Korea)

  • Chung-hun Hong

    () (College of Business Administration, Kookmin University, 77, Jeongneung-ro, Seongbuk-gu, Seoul 02707, Korea)

Abstract

In this study, we explore the stock market’s response to new information that a firm has been included in the Dow Jones Sustainability Index (DJSI) in Korea. In addition, we investigate which investor group contributes to the changes, if any significant increase in returns is found, after a firm’s incorporation into the DJSI. This study aims to identify which investors value corporate social responsibility (CSR) in the Korean stock market and examine whether the government-led campaigns for CSR have affected private sector investors, as well as those from the public sector. We find statistically significant abnormal returns for firms after their first listing in the index, implying that investors in Korean markets consider a firm’s inclusion in the DJSI as good news for the firm value. Using a unique dataset from the Korea Exchange (KRX) on investors, we classify investors into four groups: individual investors, public pension funds, other institutional investors, and foreign investors. Unlike prior studies that focus only on the existence of abnormal returns, we investigate the trading behavior of each investor group for such announcements. We find that it is mainly the buying pressure of public pension funds that generates abnormal returns. By contrast, we cannot find statistically significant results for the other investor groups. This result implies that the government-led campaign for CSR has only had limited effects in the Korean stock market, and that awareness of CSR in the private sector should be improved.

Suggested Citation

  • Sangki Lee & Insu Kim & Chung-hun Hong, 2019. "Who Values Corporate Social Responsibility in the Korean Stock Market?," Sustainability, MDPI, Open Access Journal, vol. 11(21), pages 1-14, October.
  • Handle: RePEc:gam:jsusta:v:11:y:2019:i:21:p:5924-:d:280028
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    References listed on IDEAS

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    Cited by:

    1. Mingyuan Guo & Chendi Zheng, 2021. "Foreign Ownership and Corporate Social Responsibility: Evidence from China," Sustainability, MDPI, Open Access Journal, vol. 13(2), pages 1-1, January.
    2. Mustafa K. Yilmaz & Mine Aksoy & Ekrem Tatoglu, 2020. "Does the Stock Market Value Inclusion in a Sustainability Index? Evidence from Borsa Istanbul," Sustainability, MDPI, Open Access Journal, vol. 12(2), pages 1-1, January.
    3. Bryan Schmutz & Minoo Tehrani & Lawrence Fulton & Andreas W. Rathgeber, 2020. "Dow Jones Sustainability Indices, Do They Make a Difference? The U.S. and the European Union Companies," Sustainability, MDPI, Open Access Journal, vol. 12(17), pages 1-1, August.

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    More about this item

    Keywords

    corporate social responsibility; social responsibility investment; Dow Jones Sustainability Index; public pension fund;
    All these keywords.

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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