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Does the Shield Effect of CSR Work in Crises? Evidence in Korea

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Listed:
  • Fariha Jahan

    (School of Business, Yeungnam University, Gyeongsan 38541, Republic of Korea)

  • Jungmu Kim

    (School of Business, Yeungnam University, Gyeongsan 38541, Republic of Korea)

Abstract

This paper investigates the impact of corporate social responsibility (CSR) on shareholders’ wealth during market downturn, focusing on the market crash caused by the COVID-19 pandemic and its aftermaths. We evaluate the relationship between firms’ CSR and stock returns using a sample of 803 firms listed on the Korean stock market. The results of our study reveal that firms’ pre-crisis CSR activities do not protect shareholders’ wealth during the crisis; in fact, they negatively affected stock returns during the COVID-19 crisis. This finding is consistent across several robustness tests and challenges the prevailing notion that CSR is solely a philanthropic endeavor. This study suggests that firms need to reconsider their CSR approach in order to better align it with shareholders’ interest.

Suggested Citation

  • Fariha Jahan & Jungmu Kim, 2023. "Does the Shield Effect of CSR Work in Crises? Evidence in Korea," Sustainability, MDPI, vol. 15(11), pages 1-18, June.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:11:p:8940-:d:1161865
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