Related Party Transactions and Corporate Social Responsibility: Evidence from Korea

Hyun Ah Kim and Nam Chul Jung
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Hyun Ah Kim: School of Industrial Management, Korea University of Technology & Education, Cheonan City 31253, Korea
Nam Chul Jung: School of Business Administration, Hongik University, Seoul 04066, Korea

Sustainability, 2022, vol. 14, issue 12, 1-19

Abstract: This study investigates whether related party transactions (RPTs) are associated with corporate social responsibility (CSR). Analyzing Korean public companies, we find that firms with more RPTs show poor CSR performance, especially in terms of soundness and fairness. The results are only maintained in firms with low ownership of controlling shareholders, supporting the conflict-of-interest view related to RPTs. Furthermore, we find that RPTs of firms held low by controlling shareholders do not contribute to firm value. Our results indicate that the expropriation of profits or resources through RPTs negatively affects the CSR decision of affiliations, which acts as a deterrence to long-term growth. In emerging markets where RPTs within a business group are prevalent, a government needs to restrict RPTs which are beneficial only for controlling shareholders and to encourage CSR activities of affiliations with low controlling ownership.

Keywords: related party transactions; corporate social responsibility; controlling shareholders; ownership; conflict-of-interest view (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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