Abstract
The purpose of this paper is to investigate the relationship between corporate environmental responsibility (CER) and R&D accounting treatment. Using firms listed in the Korea Stock Exchange (KSE) market between the years 2014 and 2018, this study not only investigates this relationship but also expands upon CER activities in various aspects, such as environmental performance strategy, environmental performance organization, and environmental shareholders. Furthermore, the positive association between various CER activities and R&D capitalization is significant in a highly competitive market. This relationship is robust with an alternative measure of CER activities and firm-fixed effects. This result implies that firms participating in CER activities focus on sustainable commercial success, unlike other firms.
Highlights
Corporate social responsibility (CSR) has become one of the most significant and common corporate trends
It indicates that firms likely to disclose information on the environment, as a means of communicating environmental issues and reflecting the opinion of shareholders, capitalize on research and development (R&D) expenditures. These findings are consistent with the first hypothesis, suggesting that firms involved in corporate environmental responsibility (CER) activities in various areas, such as strategy, organization, and shareholders, are likely to capitalize on R&D expenditures
We examine the association between CER activities and R&D capitalization using data from firms-years between 2014 and 2018
Summary
Corporate social responsibility (CSR) has become one of the most significant and common corporate trends. There are two key theories about the relationship between CSR and corporate value: slack resources theory and good management theory. Slack theory explains that the firms choose social investment opportunities due to available or free resources, slack resources [1]. In other words, this theory suggests that there is a positive relationship between financial performance and the amount of available slack resources. This theory suggests that there is a positive relationship between financial performance and the amount of available slack resources Another theory is the good management theory, which suggests that management practices continuously seek better ways to improve social performances, by strengthening the relationship with important stakeholders
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