CSR, social ties and firm performance

• Pages: 1310-1323
• DOI: https://doi.org/10.1108/CG-02-2019-0068
• Published date: 18 July 2019
• Date: 18 July 2019
• Author: Soojeen Sarah Jang,Hyesoo Ko,Yanghon Chung,Chungwon Woo
• Subject Matter: Strategy

CSR, social ties and f‌irm performance

Soojeen Sarah Jang, Hyesoo Ko, Yanghon Chung and Chungwon Woo

Abstract

Purpose –This paper aims to explore the effect of social ties on the relationship between corporate

social responsibility(CSR) and firm performance in Korea.

Design/methodology/approach –Social ties were measuredfrom firm disclosures of 318 Korean firms

from 2012 to 2015. Propensity score matching and regression analysis were used to investigate the

moderatingeffects of social ties on the relationshipbetween CSR and firm performance.

Findings –The result shows that socialties have more negative moderating effects on the relationship

betweenCSR and firm performance in Chaebol firms thanin non-Chaebol firms.

Practical implications –Firms need to enhance the monitoring of social ties withinboard members to

assurethe proper oversight of CSR.

Originality/value –This paper contributes to the CSRliterature by providing empirical evidence of the

negativeaspects of social ties on the relationshipbetween CSR and firm performancein Korea.

Keywords Firm performance, Corporate social responsibility, Social ties, Propensity score matching

Paper type Research paper

1. Introduction

Corporate social responsibility (CSR) is an important component of competitiveness that

enables firms to achieve sustainable growth (Dyllick and Hockerts, 2002). It is a way for

firms to benefit themselves while taking responsibility for the social and environmental

impacts of their business activities. CSR has garnered considerable attention from

academic researchers. The existing empirical literature has largely focused on the

relationship between CSR and firm performance and suggested that CSR contributes to

improving firm performance in manyways, such as through transparent business practices,

trust building among stakeholders, and a positive brand image (Chen and Wang, 2011;

Michelon et al.,2013;Weber, 2017).

Studies indicate that corporate governance is an increasingly important partof CSR (Javaid

Lone et al.,2016

;Sundarasen et al.,2016). The critical role of corporate governance is to

guide and monitor business activities,including oversight of CSR activities. Good corporate

governance guides firms to adopt good CSR practices and creates values for all

stakeholders. In particular, outside directors, who are independent of top management,

have internal monitoring roles of supervising self-interest to ensure effective corporate

governance (Dalton et al.,1999). They develop sound corporate governance structures and

thereby positively affect firm performance by improving the quality of CSR management

(Harjoto and Jo, 2011).

Furthermore, several studies have discussed the relationship between corporate

governance and CSR from the perspective of business sustainability by considering the

presence of institutional investors, outside board, and gender diversity (Glass et al., 2015;

Harjoto and Jo, 2011). Glass et al. (2015) find that a diverse leadership team is likely to

foster environmental responsibility. Harjoto and Jo (2011) find that the joint effects of CSR

and corporate governance mechanisms, such as outside directors and institutional

investors, are positively associated with firm performance and value. Despite the important

Soojeen Sarah Jang,

Hyesoo Ko and Yanghon

Chung are all based at the

Korea Advanced Institute of

Science and Technology,

Daejeon, Republic of

Korea. Chungwon Woo is

based at the Science and

Technology Policy Institute,

Sejong, Republic of Korea.

Received 21 February 2019

Revised 4 June 2019

Accepted 22 June 2019

PAGE 1310 jCORPORATE GOVERNANCE jVOL. 19 NO. 6 2019,pp. 1310-1323, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-02-2019-0068