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Controlling Shareholders and Corporate Social Responsibility

  • Journal of Insurance and Finance
  • 2013, 24(4), pp.31-74
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

LEE JI HYE 1 Byun, Hee Sub ORD ID 2

1고려대학교 경영학과
2예금보험공사

Accredited

ABSTRACT

This article studies how the incentive of controlling shareholders based on their ownership affects the corporate social responsibility (CSR)activities in Korea. Empirically, we find that direct ownership (cash flow rights) of controlling shareholders has a significantly negative influence on CSR, while their indirect ownership through affiliates has a positive effect. These results support previous findings that CSR could be the way to increase the private benefit of controlling shareholders. We confirm the same results using the environmental management activities as a dependent variable, and the results are robust after controlling for endogeneity problem. The findings are more strongly observed in firms with large profit and free cash flow, suggesting that controlling shareholders in such firms could pursue more of their private benefit of control than those in firms with less profit or free cash flow. Our analysis will provide practical and institutional implications, regarding finding the way to enhance shareholder wealth through CSR, and for both of managers and stakeholders to mutually benefit from it.

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