Does ESG Performance Enhance Firm Value? Evidence from Korea

By Bohyun Yoon, J. Lee, Ryan Byun. Sustainability, 2018

489 citations recorded by the source corpus.

We analyze whether a firm’s corporate social responsibility (CSR) plays a significant role in promoting its market value in an emerging market, namely Korea. We employ environmental, social, and corporate governance (ESG) scores to evaluate CSR performances and examine their effect on firm valuation. We find that CSR practices positively and significantly affect a firm’s market, in line with previous studies on developed countries. However, its impact on share prices can differ according to firm characteristics. For firms in environmentally sensitive industries, the value-creating effect of CSR is lesser than for firms that do not belong to sensitive industries. Specifically, corporate governance practice negatively influences the firm value of environmentally sensitive firms. Further, governance practice significantly promotes market value only for chaebols, while investors do not significantly value governance practice carried out by other firms. This finding suggests the value-enhancing effects of governance structure reformation in the former. This work mainly contributes to the literature by verifying a positive CSR-valuation relationship in emerging markets, which provides substantial policy and welfare implications in markets where governments play a major role in promoting CSR. A stronger valuation effect of CSR in chaebols may present economic background for the intervention of the Korean government in the reformation of chaebol.

Subfields: Economics and Econometrics, Marketing, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/a0da66295ca0b70ac4ff444f967a99cb2fdbc3a5

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Citations in the corpus

DOES ENVIRONMENTAL, SOCIAL AND GOVERNANCE PERFORMANCE INFLUENCE ECONOMIC PERFORMANCE? (2020, background): “A substantial amount of empirical studies found a significant relationship between ESG and economic performance (Ambec & Lanoie, 2008; Ferrero-Ferrero et al., 2016; Velte, 2017; Yoon et al., 2018; Zhao et al., 2018) while some found an insignificant relationship (Landi & Sciarelli, 2019; Margolis & ”
Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market (2019, background): “In particular, in the Korean market, CSR activities for the affiliates of large family-owned conglomerates, called chaebol, are shown to have different valuation effects [12].”
Banks and environmental, social and governance drivers: Follow the market or the authorities? (2021, background): “…a positive relationship between social and CFP (Cek & Eyupoglu, 2020; Cornett et al., 2014; Peng & Isa, 2020; Simpson & Kohers, 2002; Velte, 2019; Yoon et al., 2018), governance and CFP (Aebi, Sabato, & Schmid, 2012; Cek & Eyupoglu, 2020; Cucari et al., 2018; Peng & Isa, 2020; Velte,…”