Product market competition and corporate social responsibility activities: Perspectives from an emerging economy

Ji Hye Lee, Hee Sub Byun and Kyung Suh Park

Pacific-Basin Finance Journal, 2018, vol. 49, issue C, 60-80

Abstract: This study examines the effect of product market competition on corporate social responsibility activities in an emerging economy. Contrary to the findings of previous papers in cases of developed countries, we empirically find that firms in more competitive product markets are less engaged in corporate social responsibility activities. Considering the disciplinary role of product market competition, this result implies that corporate social responsibility activities represent overinvestments by managers rather than a competitive strategy. Additionally, consistent with agency theory, this relationship is prominently observed in firms with high free cash flow and low managerial ownership. We also find the positive firm value relevance of corporate social responsibility activities is significantly reduced or even becomes negative in less competitive product markets. The overall results suggest that existing theories on corporate social responsibility activities in advanced countries may apply differently to emerging economies with less-developed capital markets and weak investor protection.

Keywords: Product market competition; Corporate social responsibility activity; Emerging economy; Overinvestment; Korea (search for similar items in EconPapers)
JEL-codes: D21 D22 G30 G31 L11 M14 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:49:y:2018:i:c:p:60-80

DOI: 10.1016/j.pacfin.2018.04.001

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