Corporate Social Responsibility and the Value of Cash Holdings: Evidence from the Korean Stock Market

This study examines the impact of a company’s performance in terms of corporate social responsibility (CSR) on investors’ perceptions of corporate cash holdings in South Korea. The study postulates that, in emerging markets, such as South Korea, companies’ CSR activities are often implemented strate...

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Bibliographic Details
Published in:Sustainability 2021-11, Vol.13 (22), p.12689
Main Authors: Choi, Hyunjung, Ryu, Haeyoung
Format: Article
Language:English
Subjects:
Capital costs
Capital markets
Cash management
Corporate image
Emerging markets
Executives
Hypotheses
Investments
Performance evaluation
Social responsibility
Stock exchanges
Stockholders
Sustainability
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Summary:This study examines the impact of a company’s performance in terms of corporate social responsibility (CSR) on investors’ perceptions of corporate cash holdings in South Korea. The study postulates that, in emerging markets, such as South Korea, companies’ CSR activities are often implemented strategically by the management. In emerging economies, companies’ cash holdings are not subject to strict regulation of external capital providers. Hence, companies raise cash easily and manage cash holdings at their discretion, often resulting in agency problems between the management and shareholders. The study’s results reveal that capital market investors negatively perceive the cash holdings of companies actively engaged in CSR. Investors do not expect the cash held by such companies to increase their corporate value. In other words, companies may use internal funds rather than debt for financing CSR activities.
ISSN:2071-1050
2071-1050
DOI:10.3390/su132212689