- E-ISSN2233-5382
- KCI
E-ISSN : 2233-5382
Product Market Competition and Corporate Social Responsibility Activities
CHAE, Soo-Joon
Abstract
Purpose: Corporate social responsibility is a self-regulating business model that helps a firm be socially accountable to the public. By practicing corporate social responsibility, firms can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental. Corporate social responsibility activities are not directly linked to increasing corporate performance and corporate value, but rather involve spending expenses. Based on these facts, this study verifies whether the effects of corporate social responsibility activities differ depending on the firm's situation. Research design, data and methodology: This study analyzed the effect of market competition on corporate social responsibility activities using logistic regression analysis on listed companies in the KOSPI and KOSDAQ for fiscal years 2014 through 2016. In this study, market competition was measured using the Herfindahl-Herschman Index(HHI). Higher HHI value can be interpreted as a lower degree of market competition. We also measured corporate social responsibility activities using the KEJI Index published by the Korea Economic Justice Institute (KEJI). If a firm-year is included in the top 200 companies of the KEJI Index, it is classified as a good corporate social responsibility activity firm. Results: We find that companies in less competitive market were not included in the KEJI Index. This result indicates that firms in the market with lower market competition perform less corporate social responsibility activities that incur costs. An additional analysis showed that there was a significant negative relationship between the market competition and the corporate social responsibility activity scores published by the KEJI Index. These result adds robustness to the result of the hypothesis that firms that have a monopolistic place in the market practice passive corporate social responsibility activities. Conclusions: The results show that managers of a firm in the lower market competition have a lower incentive to use limited resources for projects that are not directly related to revenue. The results of this study imply that corporate social responsibility activities vary according to the position of the business. Therefore, this study suggests that market investors should consider the degree of competition in the market when they evaluate corporate social responsibility activities.
- keywords
- Market Competition, Herfindal-Herschman Index, Corporate Social responsibility Activities
Reference
Ali, A., Klasa, S., & Yeung, E. (2014). Industry concentration and corporate disclosure policy. Journal of Accounting and Economics, 58, 240-264.
Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35(3), 97-116.
Chhaochharia, V., Grinstein, Y., Grullon, G., & Michaely, R. (2016). Product market competition and internal governance: Evidence from the Sarbanes-Oxley Act. Management Science, 63, 1405-1424.
David, P., Kline, S., & Dai, Y. (2005). Corporate social responsibility, practices, corporate identity, and purchase intention: A dual process model. Journal of Public Relation Research, 17(3), 291-313.
Dhaliwal, D., Li, O., Tsang, H., & Yang, Y. (2011). Voluntary non-financial disclosure and the cost of equity capital: The case of corporate social responsibility reporting. The Accounting Review, 86(1), 59-100.
El Ghoul, S., Guedhami, O., Kwok, C. Y., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital?. Journal of Banking and Finance, 35, 388-2406.
Garbett, T. (1988). How to build a corporation’s identity and project its image. Lexington, MA: Lexington Books.
Guadalupe, M., & Perez-Gonzalez, F. (2006). The impact of product market competition on private benefits of control. Hi-Stat Discussion Paper Series d05-159. Institute of Economic Research. Hitotsubashi University.
Hahn, Y., & Kim, D. (2016). Corporate social responsibility:A comparison analysis. The East Asian Journal of Business Management, 6(4), 13-17.
Kim, D. T., Kim, M. S., & Ahn, S. S. (2017). The role of CSR proximity and psychological distance as a marketing strategy. Journal of Distribution Science, 15(9), 75-83.
Kim, S. J., & Kim, S. C. (2019). Review of corporate social responsibility effects studies. International Journal of Industrial Distribution & Business, 10(7), 17-27.
Kruse, T., & Rennie, C. (2006). Product market competition, excess free cash flows, and CEO discipline: Evidence from the U. S. retail industry. Working Paper, University of Arkansas.
Ma, J. H., Ahn, Y. H., & Choi, S. B. (2018). The impact of the buyer participation in CSR activities on a supply chain. Journal of Distribution Science, 16(3), 28-32.
Mackey, A., Mackey, B., & Barney, B. (2007). Corporate social responsibility and firm performance: Investor preferences and corporate strategies. Academy of Management Review, 32, 817-835.
McWilliams, A., & Siegel, D. (2011). Creating and capturing value: Strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 37(5), 1480-1495.
Oh, W. Y., Chang, Y. K., & Martynov, A. (2011). The effect of ownership structure on corporate social responsibility:Empirical evidence from Korea. Journal of Business Ethics, 104(2), 283-297.
Pava, M. L., & Krausz, J. (1996). The association between corporate social responsibility and financial performance:The paradox of social cost. Journal of Business Ethics, 15, 321-357.
Park, K. S., Byun, H. S., & Lee, J. H. (2011). Study on the interaction of product market competition and internal corporate governance on corporate payout policy and investment decision. Asian Review of Financial Research, 24(2), 483-523.
Ryu, H. Y., Lee, H. Y., & Chae, S. J. (2013). The effect of industry competition and earnings management. Korean Accounting Information Review, 31(3), 317-342.
Ryu, D. W., & Ryu, D. J. (2013). How does industrial concentration affect firms?: An empirical study of the relationships industrial concentration, firm value, and debt ratio. Korean Management Review, 42, 435-456.
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52, 737-783.
Yeo, Y. J, Choi, S. J., & Kwon, O. J. (2015). CSR activities as a competitive strategy based on industry competition and firm performance: Focusing on the market type. Korean Accounting Review, 40(4), 1-37.
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations