Who Values Corporate Social Responsibility in the Korean Stock Market?

Sangki Lee, Insu Kim and Chung-hun Hong
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Sangki Lee: School of Business Administration, Soongsil University, 369 Sangdo-ro, Dongjak-gu, Seoul 06978, Korea
Insu Kim: College of Business Administration, Kookmin University, 77, Jeongneung-ro, Seongbuk-gu, Seoul 02707, Korea
Chung-hun Hong: College of Business Administration, Kookmin University, 77, Jeongneung-ro, Seongbuk-gu, Seoul 02707, Korea

Sustainability, 2019, vol. 11, issue 21, 1-14

Abstract: In this study, we explore the stock market’s response to new information that a firm has been included in the Dow Jones Sustainability Index (DJSI) in Korea. In addition, we investigate which investor group contributes to the changes, if any significant increase in returns is found, after a firm’s incorporation into the DJSI. This study aims to identify which investors value corporate social responsibility (CSR) in the Korean stock market and examine whether the government-led campaigns for CSR have affected private sector investors, as well as those from the public sector. We find statistically significant abnormal returns for firms after their first listing in the index, implying that investors in Korean markets consider a firm’s inclusion in the DJSI as good news for the firm value. Using a unique dataset from the Korea Exchange (KRX) on investors, we classify investors into four groups: individual investors, public pension funds, other institutional investors, and foreign investors. Unlike prior studies that focus only on the existence of abnormal returns, we investigate the trading behavior of each investor group for such announcements. We find that it is mainly the buying pressure of public pension funds that generates abnormal returns. By contrast, we cannot find statistically significant results for the other investor groups. This result implies that the government-led campaign for CSR has only had limited effects in the Korean stock market, and that awareness of CSR in the private sector should be improved.

Keywords: corporate social responsibility; social responsibility investment; Dow Jones Sustainability Index; public pension fund (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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