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Corporate Social Responsibility and Corporate Financial Performance: Evidence from Korea

Author

Listed:
  • Choi, Jong-Seo
  • Kwak, Young-Min
  • Choe, Chongwoo

Abstract

This paper studies the empirical relation between corporate social responsibility (CSR) and corporate financial performance in Korea using a sample of 1122 firm-years during 2002-2008. We measure corporate social responsibility by both an equal-weighted CSR index and a stakeholder-weighted CSR index suggested by Akpinar et al. (2008). Corporate financial performance is measured by ROE, ROA and Tobin’s Q. We find a positive and significant relation between corporate financial performance and the stakeholder-weighted CSR index, but not the equal-weighted CSR index. This finding is robust to alternative model specifications and several additional tests, providing evidence in support of instrumental stakeholder theory.

Suggested Citation

  • Choi, Jong-Seo & Kwak, Young-Min & Choe, Chongwoo, 2010. "Corporate Social Responsibility and Corporate Financial Performance: Evidence from Korea," MPRA Paper 22159, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22159
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    File URL: https://mpra.ub.uni-muenchen.de/22159/1/MPRA_paper_22159.pdf
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    References listed on IDEAS

    as
    1. Roland Benabou & Jean Tirole, 2010. "Individual and Corporate Social Responsibility," Economica, London School of Economics and Political Science, vol. 77(305), pages 1-19, January.
    2. Abagail McWilliams & Donald S. Siegel & Patrick M. Wright, 2006. "Corporate Social Responsibility: Strategic Implications," Journal of Management Studies, Wiley Blackwell, vol. 43(1), pages 1-18, January.
    3. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    4. Teoh, Siew Hong & Welch, Ivo & Wazzan, C Paul, 1999. "The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott," The Journal of Business, University of Chicago Press, vol. 72(1), pages 35-89, January.
    5. Hyun-Han Shin & René M. Stulz, 1998. "Are Internal capital Markets Efficient?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 531-552.
    6. Kee H. Chung & Stephen W. Pruitt, 1994. "A Simple Approximation of Tobin's q," Financial Management, Financial Management Association, vol. 23(3), Fall.
    7. Baron, David P., 2001. "Private Politics," Research Papers 1689, Stanford University, Graduate School of Business.
    8. Catherine M. Paul & Donald Siegel, 2006. "Corporate social responsibility and economic performance," Journal of Productivity Analysis, Springer, vol. 26(3), pages 207-211, December.
    9. Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, September.
    10. Luis Gomez - Mejia, 2008. "Strategic use of CSR as a signal for good management," Working Papers Economia wp08-25, Instituto de Empresa, Area of Economic Environment.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Heung-Jun Jung & Dong-One Kim, 2016. "Good Neighbors but Bad Employers: Two Faces of Corporate Social Responsibility Programs," Journal of Business Ethics, Springer, vol. 138(2), pages 295-310, October.
    2. Jan Diebecker & Friedrich Sommer, 2017. "The impact of corporate sustainability performance on information asymmetry: the role of institutional differences," Review of Managerial Science, Springer, vol. 11(2), pages 471-517, March.
    3. Wang, Wei-Kang & Lu, Wen-Min & Kweh, Qian Long & Lai, Hsiao-Wen, 2014. "Does corporate social responsibility influence the corporate performance of the U.S. telecommunications industry?," Telecommunications Policy, Elsevier, vol. 38(7), pages 580-591.
    4. repec:nup:jrmdke:v:5:y:2017:i:3:415-437 is not listed on IDEAS
    5. Karen Benson & Peter M Clarkson & Tom Smith & Irene Tutticci, 2015. "A review of accounting research in the Asia Pacific region," Australian Journal of Management, Australian School of Business, vol. 40(1), pages 36-88, February.
    6. repec:gam:jsusta:v:9:y:2017:i:9:p:1498-:d:109365 is not listed on IDEAS
    7. Mihai-Bogdan AFRASINEI & Iuliana Eugenia GEORGESCU & Costel ISTRATE, 2016. "The Influence Of The Connections Of Romanian Non-Listed Firms To Tax Havens On Their Profitability," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 8(4), pages 572-596, December.
    8. repec:gam:jsusta:v:10:y:2018:i:3:p:834-:d:136549 is not listed on IDEAS
    9. Mingjun Hou & Heng Liu & Peihua Fan & Zelong Wei, 2016. "Does CSR practice pay off in East Asian firms? A meta-analytic investigation," Asia Pacific Journal of Management, Springer, vol. 33(1), pages 195-228, March.
    10. repec:eco:journ1:2017-02-41 is not listed on IDEAS
    11. Lee, Eun-Ju, 2016. "Empathy can increase customer equity related to pro-social brands," Journal of Business Research, Elsevier, vol. 69(9), pages 3748-3754.
    12. Young Kyun Chang & Won-Yong Oh & Jee Hyun Park & Myoung Gyun Jang, 2017. "Exploring the Relationship Between Board Characteristics and CSR: Empirical Evidence from Korea," Journal of Business Ethics, Springer, vol. 140(2), pages 225-242, January.
    13. Vintilă Georgeta & Nenu Elena Alexandra & Gherghina Ştefan Cristian, 2014. "Empirical Research Towards the Factors Influencing Corporate Financial Performance on the Bucharest Stock Exchange," Scientific Annals of Economics and Business, De Gruyter Open, vol. 61(2), pages 219-233, December.

    More about this item

    Keywords

    corporate social responsibility; corporate financial performance; KEJI index; instrumental stakeholder theory;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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