Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
권호 표지
DOI QR코드

DOI QR Code

The Effects of Socially Responsible Activities on the Management Performance of Internationally Diversified Firms: Evidence from Korean Small- and Medium-Sized Firms

  • An, Sang-Bong (Department of Business Administration, Shingyeong University) ;
  • Kang, Tae-Won (Department of Supply Chain and Logistics, Kunsan National University)
  • Received : 2020.05.31
  • Accepted : 2020.08.11
  • Published : 2020.08.31
Download PDF
⟨ Previous Next ⟩

Abstract

Purpose - It seems common sense that corporate social responsibility (CSR) is a key driver of business sustainability. Nevertheless, there has been little research on the performance of socially responsible activities, including economic and environmentally responsibility activities, in internationally diversified firms. Design/methodology - The purpose of this study was to evaluate the effects of CSR activities on management performance. For this evaluation, an empirical analysis was conducted with total of 2,520 cases, selected from companies listed on the Korea Composite Stock Price Index market for six years from 2013 to 2018. As proxies for management performance, financial data such as a total asset net profit ratio and a total asset operating ratio were used. A multivariate regression analysis was conducted to test hypotheses. Findings - The results of this analysis indicated that firms in the CSR outstanding group were ranked significantly higher than other groups in management performance. In addition, CSR activities of internationally diversified firms positively influenced the total asset net profit ratio and total asset operating ratio. Originality/value - The results suggest that the CSR activities of these firms can play a significant role in enhancing management performance in the economic status of Korea, where the degree of export dependency is high.

Keywords

References

  1. Beaudoin, C. A. (2008), Earnings Management: The Role of the Agency Problem and Corporate Social Responsibility, Philadelphia, PA: Drexel University.
  2. Cha, Seung-Min, Jai-Ho Chung and Yong-Keun Yoo (2010), "Corporate International Diversification and Cost of Equity Capital: Korean Evidence", Korean Management Review, 39(1), 157-175.
  3. Chih, Hsiang-Lin, Chung-Hua Shen and Feng-Ching Kang (2008), "Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International Evidence", Journal of Business Ethics, 79(1-2), 179-198. https://doi.org/10.1007/s10551-007-9383-7
  4. Cho, Mun-Kee and Suk-Yeon Kim (2014), "The Effect of Corporate Social Responsibility on Earnings Quality", Tax Accounting Research, 41, 213-231.
  5. Choi, Su-Bi (2016), "Exploring the Relevance of Corporate Risk in the Light of Corporate Social Responsibility", Tax Accounting Research, 50, 227-249. https://doi.org/10.35349/tar.2016..50.012
  6. Chon, Mi-Lim (2012), "Corporate Social Responsibility and the Cost of Equity Capital", Accounting Information Review, 30(4), 289-312.
  7. Denis, D. J., D. K. Denis and K. Yost (2002), "Global Diversification, Industrial Diversification, and Firm Value", Journal of Finance, 57(5), 1951-1979. https://doi.org/10.1111/0022-1082.00485
  8. Doukas, J. A. and L. Lang (2003), "Foreign Direct Investment, Diversification and Firm Performance", Journal of International Business Studies, 34(2), 153-172. https://doi.org/10.1057/palgrave.jibs.8400014
  9. Fauver, L., J. Hauston and A. Naranjo (2003), "Capital Market Development, International Integration, Legal Systems, and the Value of Corporation Diversification: A Cross-country Analysis", Journal of Financial Quantitative Analysis, 38(1), 135-157. https://doi.org/10.2307/4126767
  10. Gande, A., C. Schenzler and L. W. Senbet (2009), "Valuation Effects of Global Diversification", Journal of International Business Studies, 40(9), 1515-1532. https://doi.org/10.1057/jibs.2009.59
  11. Geringer, J. M., P. W. Beamish and R. C. DaCosta (1989), "Diversification Strategy and Internationalization: Implications for MNE Performance", Strategic Management Journal, 10(2), 109-119. https://doi.org/10.1002/smj.4250100202
  12. Geringer, M., S. Tallman and M. Olsen (1989), "Product and International Diversification among Japanese Multinational Firms", Strategic Management Journal, 21(1), 51-80. https://doi.org/10.1002/(SICI)1097-0266(200001)21:1<51::AID-SMJ77>3.0.CO;2-K
  13. Goldberg, S. R. and F. L. Heflin (1995), "The Association between the Level of International Diversification and Risk", Journal of International Financial Management and Accounting, 6(1), 1-25. https://doi.org/10.1111/j.1467-646X.1995.tb00047.x
  14. He, Jia and L. K. Ng (1998), "The Foreign Exchange Exposure of Japanese Multinational Corporations", The Journal of Finance, 7(2), 13-33.
  15. Hemingway, C. A. and P. W. Maclagan (2004), Managers' Personal Values as Drivers of Corporate Social Responsibility", Journal of Business Ethics, 50(1), 33-44. https://doi.org/10.1023/B:BUSI.0000020964.80208.c9
  16. Hwang, Seong-Jun and Su-Jeon Ryu (2018), "Relationships between SRI Disclosure and Business Performance", Journal of Digital Convergence, 16(12), 137-145. https://doi.org/10.14400/JDC.2018.16.12.137
  17. Jang, Jee-In, Kyung-Joo Lee and Heon-Seob Choi (2013), "The Relation between Corporate Social Responsibility and Financial Performance Korean Firms", Pan-Pacific Journal of Business Research, 4(2), 3-17
  18. Jeong, In-Sik (2003), "A Study of the Relationship between International Diversification and Organizational Performance among Korean Exporters", Korean Trade Review, 28(1), 139-155.
  19. Ji, Sang-Hyun (2019), "A Study on the Audit Quality of Win-Win Growth Corporate", Journal of Industrial Economics and Business, 32(2), 553-580. https://doi.org/10.22558/jieb.2019.04.32.2.553
  20. Ji, Sang-Hyun and Sang-Bong An (2019), "A Study on the Real Earnings Management of Shared Growth Corporate", Journal of International Trade & Commerce, 15(2), 389-406. http://dx.doi.org/10.16980/jitc.15.2.201904.389
  21. Ji, Sang-Hyun, Ki-Chang Yoon, Joshua Park, Sang-Bong An and Han-Mo Oh (2019), "The Relationship between CEO Governance and Social Responsibility of Service Firms", Sustainability, 11, 1-13. https://doi.org/10.3390/su11010001
  22. Jones, T. M. (1995), "Instrumental Stakeholder Theory: A Synthesis of Ethics and Economics", Academy of Management Review, 20(2), 404-437. https://doi.org/10.5465/AMR.1995.9507312924
  23. Kang, Jin-Goo (2013), "The Relationship between Corporate Diversification and Corporate Social Performance", Strategic Management Journal, 34(1), 94-109. https://doi.org/10.1002/smj.2005
  24. Kang, Kyung-Yi (2015), "Analysis of the Relationship between the Performance of CSR and the Return in the Stock Market: Using ISO26000 as a Performance Index", Tax Accounting Research, 45, 83-104.
  25. Keats, B. W. and M. A. Hitt (2017), "A Causal Model of Linkages among Environmental Dimensions, Macro Organizational Characteristics, and Performance", Academy of Management Journal, 31(3), 570-598. https://doi.org/10.2307/256460
  26. Kim, Deok-Ho, Ju-Han Kim, Joong-Wha Kim and Se-Hak Chun (2013), "A Mediating Effect of Corporate Social Responsibility between Governance Structure and Firm Value", The Journal of Business Education, 27(1), 125-148.
  27. Kim, Hyun-Ah and Kwang-Wuk Oh (2016), "Corporate Partnership Activity, Demand of External Audit and Value Relevance of Accounting Information", Accounting Information Review, 34(3), 433-457.
  28. Kim, Joon-Hyun (2018), "Measurement of International Diversification based on the Information on Foreign Subsidiaries and Its Association with Earnings Quality", Korean Accounting Review, 43(3), 81-12. https://doi.org/10.24056/kar.2018.04.004
  29. Kim, Myung-In, Hyung-Tae An and Jong-Dae Kim (2012), "The Impact of International Diversification on Value Relevance of Earnings", Korean Accounting Review, 37(4), 157-193.
  30. Kim, Tae-Wan (2018), "The Efficiency of Valuation and Persistence of Accruals and Cash Flows by the Level of Social Responsibility Activities", Tax Accounting Research, 58, 25-55.
  31. Kim, Tae-Wan and Jin-Woo Kim (2018), "Differentiative Market Response of Management Performance based on the Corporate Social Responsibility Activity", Tax Accounting Research, 55, 95-114.
  32. Kim, Young-Hwa (2014), "The Effect of CSR on Earnings Management and Firm Value", Tax Accounting Research, 40, 147-163. https://doi.org/10.35349/tar.2014..40.008
  33. Kwak, Young-Min and Sang-Hyun (2019), "A Study on the Accounting Conservatism of WinWin Growth Corporate", Management and Information System Review, 38(1), 155-168.
  34. Kwon, Han-Sup (2016), "The Effect of Corporate Social Responsibility on Accounting Information Quality Focused on Financial Industry", Tax Accounting Research, 50, 193-211. https://doi.org/10.35349/tar.2016..50.010
  35. Kwon, Taek-Ho (1999), "Related Diversification and Firm Value", The Korean Journal of Financial Management, 36(4), 33-62. https://doi.org/10.22510/KJOFM.2019.36.4.002
  36. Kwon, Sang-Jung and Chan-Ho Lee (2018), "A Study on Factors Influencing the Level of Firm's Win-Win Growth: On Focusing Real Estate Policy", Tax Accounting Research, 55, 161-186.
  37. Lee, Jang-Ho (2003), "International Diversification, Product Diversification, Organizational Learning, Their Interactions, and Firm Value", Korean Management Review, 32(5), 1291-1315.
  38. Lee, Jae-Mok and Yong Kim (2013), "The Effects of Corporate Social Responsibility on Firm Value", Tax Accounting Research, 35, 27-55.
  39. Lee, Sang-Cheol and Suk-Yeon Kim (2015), "The Effect of Corporate Social Responsibility on Cost Behavior", Tax Accounting Research, 44, 209-226.
  40. Lee, Yun-Kyeong and Jong-Kwon Ko (2013), "The Effect of Corporate Social Responsibility on the Cost of Equity Capital and Information Asymmetry", Korean Accounting Journal, 22(5), 159-193.
  41. Lee, Yun-Sang (2018), "A Study on the Relationship between Corporate Social Responsibility Detailed Index and Tax Avoidance", Tax Accounting Research, 57, 55-73. https://doi.org/10.35349/tar.2018..57.004
  42. Lewellen, W. G. (1971), "A Pure Financial Rationale for the Conglomerate Merger", The Journal of Finance, 26(2), 521-537. https://doi.org/10.1111/j.1540-6261.1971.tb00912.x
  43. Lim, Hyoung-Joo and Jong-Seo Choi (2013), "Corporate Social Responsibility and Earnings Management: Does the External Business Ethics Portray Internal Ethics?", Korean Accounting Journal, 22(5), 257-309.
  44. Reeb, D. M., C. C. Kwok and H. Y. Baek (1998), "Systematic Risk of the Multinational Corporation", Journal of International Business Studies, 29(2), 263-279. https://doi.org/10.1057/palgrave.jibs.8490036
  45. Reeb, D. M., S. A. Mansi and J. M. Allee (2001), "Firm Internationalization and the Cost of Debt Financing: Evidence from Non-provisional Publicly Traded Debt", Journal of Financial and Quantitative Analysis, 36(3), 395-414. https://doi.org/10.2307/2676289
  46. Ryu, Ye-Rin and Sang-Hyun Ji (2018a), "A Study on the Earnings Management of Win-Win Growth Corporate: Utilizing Book-Tax Difference Information", Tax Accounting Research, 57, 75-95.
  47. Ryu, Ye-Rin and Sang-Hyun Ji (2018b), "A Study on the Relevance between the Corporate Governance and Win-Win Growth", Journal of Industrial Economic and Business, 31(4), 1419-1442. https://doi.org/10.22558/jieb.2018.08.31.4.1419
  48. Ryu, Ye-Rin, Sang-Hyun Ji and Gyeong-Rak Lee (2018), "A Study on the Relevance between Socially Responsible Investment and Book-Tax Difference", Journal of the Korea Convergence Society, 9(2), 183-190. https://doi.org/10.15207/JKCS.2018.9.2.183
  49. Shaked, I. (1986), "Are Multinational Corporations Safer?", Journal of International Business Studies, 17(1), 83-106. https://doi.org/10.1057/palgrave.jibs.8490418
  50. Shin, Yong-Mi and Chan-Ho Lee (2018), "An Empirical Study on the Effect of Win-Win Growth Activity on Management Performance", Journal of Digital Convergence, 16(7), 71-78. https://doi.org/10.14400/JDC.2018.16.7.071
  51. Shin, Young-Zik, Gi-Man Nam and Jae-Hyeong Lee (2019), "The Relationship between Corporate Social Responsibility Activities and Stock Price Crash Risk in the Aspect of Agency Problem", Korean Accounting Journal, 28(5), 43-84. https://doi.org/10.24056/KAJ.2019.08.001
  52. Stein, J. C. (1997), "Internal Capital Markets and the Competition for Corporate Resources", The Journal of Finance, 52(1), 111-133. https://doi.org/10.1111/j.1540-6261.1997.tb03810.x
  53. Tallman, S. and J. Li (1996), "Effects of International Diversity and Product Diversity on the Performance of Multinational Firms", Academy of Management Journal, 39(1), 179-196. https://doi.org/10.2307/256635
  54. Waddock, S. A. and S. B. Graves (1997), "The Corporate Social Performance-Financial Performance Link", Strategic Management Journal, 18(4), 303-319. https://doi.org/10.1002/(SICI)1097-0266(199704)18:4<303::AID-SMJ869>3.0.CO;2-G
  55. Yoo, Yong-Keun, Hyun-Hee Kim and Hong-Min Chun (2014), "Corporate International Diversification and Real Earnings Management", Korean Accounting Review, 39(1), 293-322.