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The Effect of Social Ties between Outside and Inside Directors on the Association between Corporate Social Responsibility and Firm Value

Ju Hyoung Park (), Hyun-Young Park () and Ho-Young Lee ()
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Ju Hyoung Park: School of Business, Yonsei University, Seoul 03722, Korea
Hyun-Young Park: School of Business, Yonsei University, Seoul 03722, Korea
Ho-Young Lee: School of Business, Yonsei University, Seoul 03722, Korea

Sustainability, 2018, vol. 10, issue 11, 1-24

Abstract: The purpose of this paper is to examine the association between activities related to corporate social responsibility (C81SR) and firm value, and whether social ties between outside and inside directors within the board (social ties) affect this association. We analyzed a sample of non-financial firms with fiscal year-end in December listed in the Korea Stock Exchange market for the period of 2012–2017, measuring the intensity of social ties based on region and school relations using the concept of density from social network theory. Using environment, social, and governance (ESG) scores from the Korea Corporate Governance Service to measure CSR activities, we find that, on average, firms can increase their value through CSR activities in Korea. In addition, in firms with strong social ties, the positive association between CSR activities and firm value is attenuated, indicating that boards with strong social ties are ineffective in monitoring CSR activities. Although the government has made great efforts to improve corporate governance with a focus on independence of outside directors, the results of our analysis indicate that there is room for firms to improve board independence substantively in a society where nepotism is widespread.

Keywords: social ties; corporate social responsibility; board independence (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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