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Business Groups and Corporate Social Responsibility : Evidence from Korea

  • Yoon K. Choi Department of Finance, College of Business, University of Central Florida, USA
  • Seung Hun Han School of Business and Technology Management, College of Business Korea Advanced Institute of Science and Technology, Korea
  • Yonghyun Kwon Division of Business Administration, College of Global Business Korea University Sejong Campus, Korea
This study examines the effect of business group structure on the performance of corporate social responsibility (CSR) in Korean firms using the Korea Economic Justice Institute’s (KEJI) index as a proxy for CSR ratings. We find that chaebol affiliation, the existence of a professional corporate foundation for CSR activities, and firm- and group-level financial donations is positively related to CSR performance. However, family firms, family-controlled business groups, and the existence of individual family owners are associated negatively with CSR performance. Overall, our results suggest that internal capital markets in business groups can improve CSR performance through internal resource allocation, potentially through corporate foundations, although family control can weaken the positive effect. This study contributes to the literature by examining the influence of business groups’ group-wide management (i.e., ‘spillover effect’ within the group) on CSR performance, consistent with the efficient internal capital market hypothesis of business groups.

  • Yoon K. Choi
  • Seung Hun Han
  • Yonghyun Kwon
This study examines the effect of business group structure on the performance of corporate social responsibility (CSR) in Korean firms using the Korea Economic Justice Institute’s (KEJI) index as a proxy for CSR ratings. We find that chaebol affiliation, the existence of a professional corporate foundation for CSR activities, and firm- and group-level financial donations is positively related to CSR performance. However, family firms, family-controlled business groups, and the existence of individual family owners are associated negatively with CSR performance. Overall, our results suggest that internal capital markets in business groups can improve CSR performance through internal resource allocation, potentially through corporate foundations, although family control can weaken the positive effect. This study contributes to the literature by examining the influence of business groups’ group-wide management (i.e., ‘spillover effect’ within the group) on CSR performance, consistent with the efficient internal capital market hypothesis of business groups.
Business group, Financial donation, Corporate social responsibility