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korean management review - Vol. 45, No. 5, pp. 1551-1586
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Oct 2016
Received 19 Jan 2016 Revised 04 May 2016 Accepted 02 Jun 2016
DOI: https://doi.org/10.17287/kmr.2016.45.5.1551
Does Corporate Social Responsibility Activities Reduce the Risk of Firms?: Evidence from Korea
Ji Hye Lee* ; Hee Sub Byun**
*Research Fellow, Construction & Economy Research Institute of Korea, First Author
**Assistant Professor, Department of Finance, College of Business, Hallym University, Corresponding Author
사회적 책임 활동은 기업의 위험을 완화시키는가?
이지혜* ; 변희섭**
*(주저자) 한국건설산업연구원 연구위원 (jihyelee@cerik.re.kr)
**(교신저자) 한림대학교 경영대학 재무금융학과 조교수 (heesbyun@hallym.ac.kr)

As the corporate social responsibility (CSR) is an issue of growing importance in the recent Korean capital market, this paper investigates the effect of it on the inherent uncertainty of firms' management. Understanding of firms’ intrinsic risk is very crucial, as firms make various financial decisions, such as investment and raising capital, based on the risk-return trade-off. For instance, investors demand high required rated of return from firms with high risk, and those firms could raise capital in smooth water when they realize the risk. In addition, firms with high business risk also have high bankruptcy risk, so shareholders and creditors of those firms should grasp such risk in advance.

By focusing on the relation between CSR and risk of the firm, we strengthen the understanding of financial benefit and cost from the CSR activities. Between the two competing perspectives of the CSR, we examine which one is empirically supported. One part of the existing studies has positive view on the CSR: it could be a strategy that satisfies various stakeholders (strategic choice hypothesis), and signals high value of the firm to the capital market (product signaling hypothesis). According to them, CSR will help firms with reducing risks and obtaining stable future cash flow. On the contrary, the other part hypothesizes that CSR brings much cost and does not increase the firm value (irrelevance hypothesis). Moreover, as its result is hard to be attained in a short term, managers could over-investment in it to enhance their reputation (overinvestment hypothesis). These hypotheses assume the CSR activities will increase the risk of the firm.

Empirically, we confirm that the CSR activities have a significant negative effect on the total risk of the firm, especially the unsystematic risk (firm-specific risk). Moreover, we find that the CSR activities have a significant positive effect on risk-adjusted stock return. This result implies that the risk reduction effect could be considered as the main path of the increase of firm value suggested in previous literatures. In sum, firms with brisk CSR activities are benefited with timely financing and the improvement of business sustainability due to the risk reduction. In the meantime, the risk reduction effect is strongly observed in firms with low asset scale and stand-alone firms. As there are two conflicting views about the CSR activities, we provide firms with strategic implications by presenting empirical findings of benefits from the activities. Additionally, our findings could support the making of policies and the introduction of regulations that encourage the activities.

최근 자본시장에서 사회적 책임 활동이 대두되고 있는 현실에 주목하여, 본 연구는 관련한 활동 수행이 기업경영에 내재한 불확실성을 완화시킬 수 있는가를 실증적으로 확인한다. 실증분석결과, 사회적 책임 활동의 적극적인 이행은 기업에 내재한 위험을 유의적으로 감소시키는 것으로 관찰되었으며, 이러한 효과는 주로 기업 고유의 위험(firm specific risk)을 통해 나타났다. 추가적으로 사회적 책임 활동은 위험조정 투자수익률에 긍정적인 영향을 미치는 것으로 관찰되어 본 연구의 결과가 기업가치 관련성에 대한 주요한 경로로 작용할 수 있음을 확인할 수 있었다. 이상의 결과는 기업이 적극적인 사회적 책임 활동을 통해 위험 완화라는 편익을 누림으로써 원활히 외부자금을 조달함은 물론, 영업활동의 지속 가능성을 강화시킬 수 있음을 시사한다. 한편, 앞선 결과는 규모가 작은 기업이나 대규모 기업집단에 소속되지 않은 독립기업에서 보다 강하게 관찰되었다.

본 연구는 사회적 책임 활동에 대한 상반된 논의가 제기되고 있는 가운데, 국내 자본시장에서 동 활동 이행의 편익에 대한 구체적인 실증적 논거를 제시함으로써 기업에 전략적 시사점을 제공할 것으로 예상된다. 더불어 본 연구의 결과는 기업의 사회적 책임 활동을 장려하기 위한 정책입안 및 규제도입의 근거자료로도 활용이 가능할 것이다.