International Diversification, Corporate Social Responsibility, And Corporate Governance: Evidence From Korea

Abstract

We examine how multinational corporations (MNC) international diversification (ID) is related to their corporate social responsibility (CSR) activities in the domestic market. We also investigate whether corporate governance, specifically the conglomerate (chaebol) structure, affects the relationship between ID and CSR activities in the domestic market. We perform empirical analysis using a sample of 606 firm-year observations of Korean-listed manufacturing MNCs from 2005 to 2010. We find that ID is negatively associated with CSR, and that this relationship is stronger for chaebol firms. These results are robust after controlling for various factors that affect measurements of ID. Our findings suggest that ID related to market diversification through exports and foreign affiliates appears to push MNCs to perform fewer CSR activities in the domestic market. Our findings also indicate that the effect of chaebol firms on the relationship between ID and CSR is greater than that of non-chaebol firms in Korean market. Our study contributes to the ID and CSR literature as the first study to provide empirical evidence on the association between ID and CSR activities in the domestic market for Korean firms using three aspects of ID measurement. Given that empirical evidence on this issue is very limited, our findings have implications for academics, practitioners, and policymakers in understanding the relationship between ID and CSR strategy.

Business Groups and Corporate Responsibility for the Public Good

“…As Korean firms experienced threats to their legitimacy and sustainability during the financial crisis, chaebol firms effectively used CSR strategies to regain their social legitimacy. Cho et al (2015) also argues that chaebols tend to adopt CSR more efficiently than non-chaebols. Chaebols also have the tendency to fit CSR activities, adopted domestically, into their international diversification strategies.…”

A Fusion Approach for Exploring the Key Factors of Corporate Governance on Corporate Social Responsibility Performance

“…The supervisory board is also one of the important factors in enterprise development, and its core function is to supervise the actions of directors and senior managers, thus assisting in the fulfillment of CSR [32]. A higher proportion of collateralized shares of directors and supervisors' shareholdings implies that lower corporate performance [35] may lead to a decrease in CSR activities. CEO duality refers to the positions of board leadership and corporate management being held simultaneously by the same person.…”

Corporate Governance and Corporate Social Responsibility: Evidence from the Role of the Largest Institutional Blockholders in the Korean Market

“…Thus, stakeholders are increasingly asking firms to fulfil social responsibilities and to protect their rights [26]. In response, Korean firms are increasing their investments in CSR [27], and managers' awareness about their social duties is rising [28]. Shareholders and government authorities have increased the pressure on Korean firms to undertake CSR activities since the 1997 Asian financial crisis.…”