Relationship between Related Party Transactions and the Social Contribution Activities of South Korean Chaebol Companies

Haeyoung Ryu and Soo-Joon Chae
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Haeyoung Ryu: Department of Business Administration, Hansei University, Gunpo-si 15852, Korea
Soo-Joon Chae: Department of Business Administration & Accounting, Kangwon National University, Chuncheon-si 24341, Korea

Sustainability, 2022, vol. 14, issue 5, 1-11

Abstract: Corporate social responsibility (CSR) encompasses activities through which a firm ultimately achieves sustainable management by improving the society and environment. Contrary to the general perception that CSR activities can improve only the enterprise value (EV), they can also be strategically deployed based on agency problems (situational factors). Specifically, by focusing on the nature of related party transactions that exhibit high tendencies to introduce agency problems, this study analyzes whether South Korean firms that engage in such transactions perform CSR activities more actively than those that do not. The empirical analysis reveals that firms that engage in related party transactions exhibit increased CSR activity scores, indicating that managers are more likely to deploy CSR activities as a tool for managing their image and concealing or embellishing illicit corporate transactions. Hence, CSR activities undertaken at the expense of shareholders may be opportunistically exploited as a tool for positively embellishing a firm’s image. However, it is observed that chaebol companies do not strategically exploit CSR activities, despite being engaged in related party transactions. Thus, chaebol companies that are registered with a large business group and under the supervision system of the government are unlikely to opportunistically exploit CSR activities.

Keywords: related party transactions; agency problem; social contribution activities; chaebol; large business group designation system; corporate social responsibility (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 (1)

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