Abstract
We examined the relationship between management characteristics and corporate social responsibility (CSR) and this relationship was differentiated by the level of corporate governance. Our analysis was undertaken in firms listed on the Korean Stock Exchange (KSE) from 2006 to 2015. We employed Ordinary Least Square (OLS) regression after clustering the standard errors at the firm level in order to examine these relationships. The KEJI (Korea Economic Justice Institute) index was used as a proxy for CSR and a big data-based proxy estimated from multimedia was used as the level of advertising. We showed that there is a positive relationship between overconfident management and CSR activities. We then categorized the CSR activities as primary and social activities and found that overconfident management is more aggressive in primary CSR activities. In addition, overconfident management makes fewer CSR expenditures when the management is in a chaebol firm but promotes more CSR advertisement. This finding indicates that chaebol affiliation controls overinvestment in CSR activities but promotes CSR advertisements by overconfident managers. Similarly, we found consistent results with overconfident owner-managers. Prior literature on CSR activities focuses on the impact of CSR activities on firm performance. In this paper, we elucidated the determinants of CSR activities, so that this research contributes to firms’ decision-making about sustainable management. Our estimation of CSR variables with big data approaches will also guide future research on this issue. We expect our study to be used as a reference for decision-making by relevant authorities and stakeholders.
Highlights
Corporate social responsibility (CSR) helps a firm be socially responsible to itself, its stakeholders, and the public
We examined the relationship between management overconfidence and CSR activities
Our findings revealed that managerial overconfidence is positively related to CSR activities and CSR advertisements
Summary
Corporate social responsibility (CSR) helps a firm be socially responsible to itself, its stakeholders, and the public. Ethical, and charitable responsibilities in addition to their intrinsic economic responsibilities [3] This fulfillment of responsibilities has a positive effect on the relationship with various stakeholders, making long-term survival possible as a sustainable company. We empirically analyze the effect of managerial overconfidence on CSR activities, which are essential for corporate sustainability management. We interpret that the owner-manager acts as a variable to restrain excessive CSR investment based on agent theory. In both cases with chaebol affiliation and owner-manager, we show that overconfident managers further increase CSR advertisement compared to actual CSR activities.
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