Abstract
Corporate social responsibility has recently become a new metric of corporate performance. Some argue that corporate social responsibility should be used not only for corporate image improvement, but also as a major competitive strategy. Given this perspective, this study considers the effect of corporate social responsibility on firm value using data from all firms listed on the Korea Exchange from 2005 to 2015 that provide corporate social responsibility information. Specifically, we use the Korea Economic Justice Institution Index, which is an important metric for corporate social responsibility in Korea, to empirically analyze the relation between corporate social responsibility and firm value. Further, given the growing attention to the Korean manufacturing environment and the significant influence of the global manufacturing environment, we aim to determine the differential characteristics of manufacturing corporations using the relation between corporate social responsibility and firm value. The results strongly support a positive relation between corporate social responsibility and firm value. Furthermore, our detailed analysis of the manufacturing industry indicates some differential characteristics with respect to this relation. Overall, we find that every corporation should adopt corporate social responsibility as an active competitive strategy, taking the corporate condition into account.
Highlights
Fortune, the major business management magazine, announces its global Fortune 500 ranking of companies annually
We use multiple regression analysis to determine the difference between the manufacturing industry and other industries regarding the influence of the corporate social responsibility index on firm value
We find that Hypothesis 1, that corporate social responsibility positively affects firm value, is validated by the results of research model 1 in the case of manufacturing firms
Summary
The major business management magazine, announces its global Fortune 500 ranking of companies annually. In 2007, Walmart was ranked highest, with sales of 320 trillion Korean won, and Samsung Electronics was ranked 46th, with sales of 80 trillion Korean won. It is difficult to compare countries and companies, Walmart’s sales are similar to Indonesia’s gross domestic product (GDP), which is the 21st largest in the world, and Samsung’s sales are similar to Peru’s GDP, which is the 53rd largest in the world. The revenues of certain corporations are larger than some countries’ economies. This increase in the scale of corporations implies that the impact of corporations has increased, and, as corporations become more powerful, people’s expectations of corporate behavior increase. Corporate social responsibility has become one of the top priorities of both global and Korean companies, the latter being the focus of this study
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