Corporate social responsibility and firm value

Abstract

Corporate Social Responsibility (CSR) becomes an integral part of business practices and enables firms to gain sustainable competitive advantages. Many studies reveal that CSR activities positively affect firm performance. However, little attention has been paid to the impact of corporate governance in the context of South Korea’s Chaebols. Thus, the main objective of the paper is to explore how the corporate governance of Chaebols affects the relationships between CSR and firm value. Regression analysis is used to analyze Chaebols sampled from the Citizens’ Coalition for Economic Justice Institute (2005-2011). The study finds that Chaebols’ CSR practices positively influence firm value. However, their corporate governance practices have a negative moderating effect on the relationship between CSR and firm value. These findings suggest that Chaebols tend to over-invest to build up strong corporate governance and CSR practices, and their private interests cannot be entirely excluded in CSR related decision-making. Therefore, firm value will be lower due to inefficient use of resources to establish strong corporate governance and calling into question their transparency of CSR practices. As a whole, the study builds on previous research by taking into account Chaebols’ corporate governance and its effect on the CSR-firm vallue relation.