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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 52, No. 5, pp.983-1002
ISSN: 1226-1874 (Print)
Print publication date 31 Oct 2023
Received 23 Feb 2023 Revised 15 Jun 2023 Accepted 29 Jun 2023
DOI: https://doi.org/10.17287/kmr.2023.52.5.983

기업의 여유자원과 ESG 성과에 대한 연구: 유상증자를 중심으로

Soyeon Kim ; Jiyoon Lee ; Boxian Wang
(First Author) Chosun University symik@chosun.ac.kr
(Corresponding Author) Yonsei University jiyoonlee@yonsei.ac.kr
(Co-Author) Yonsei University parkhan1013@yonsei.ac.kr
ESG Performance, Financial Slack, and Financial Constraints: Evidence from Seasoned Equity Offerings of Korean Firms


Copyright 2023 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper examines environmental, social, and governance (ESG) performance around seasoned equity offerings (SEOs). A firm may improve ESG performance prior to SEOs to the extent that it believes that investors will be more favorable to firms with better ESG performance (window-dressing hypothesis). In contrast, SEO may indicate that a firm is short of internal resources and a firm under little financial slack may sacrifice ESG performance (Slack resource hypothesis). Through empirical analyses, we find support for the latter: ESG performance of firms decrease significantly around SEOs, while capital expenditures and R&D do not decrease. However, financially constrained firms do not reduce ESG performance, suggesting that these firms care about investors' perception of them. The results overall are consistent with the proposition that unconstrained firms with little financial slack sacrifice ESG performance but constrained firms cannot as doing so will further aggravate financial constraints. As such, both financial slack and financial constraints are important determinants of ESG performance.

Keywords:

Corporate social responsibility, environmental, social, and governance (ESG), seasoned equity offerings (SEOs), financial constraints, financial slack

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∙ The author Soyeon Kim is an Assistant Professor in Finance at the College of Business, Chosun University. Professor Kim received her bachelor's degree in computer science as well as MS and Ph.D. in Finance from Yonsei University. Previously, she served as a full-time lecturer at Yonsei School of Business and worked at Daishin Economic Research Institute. Her main research interests include corporate governance, supply chain management, and ESG.

∙ The author Jiyoon Lee is an Associate Professor at the School of Business, Yonsei University. Professor Lee received her MS in Finance from Yonsei University, and PhD in Finance from University of Illinois, Urbana Champaign. Her research interests include empirical corporate finance, corporate social responsibility, corporate governance, and R&D.

∙ The author Boxian Wang completed her Bachelor's degree in Business Administration at Sungkyunkwan University and worked in a Chinese investment company in Beijing for two years, focusing on merger and acquisition practices. Currently, she is enrolled in the integrated master's and doctoral program in Finance at Yonsei University. Her research interests include corporate finance and related fields such as ESG and corporate environmental management.