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Does ESG Performance Enhance Firm Value? Evidence from Korea

Title
Does ESG Performance Enhance Firm Value? Evidence from Korea
Author
이정환
Keywords
ESG; firm value; corporate social responsibility; sustainable development; Korea; environmentally sensitive industries; family-managed business groups; corporate governance
Issue Date
2018-10
Publisher
MDPI
Citation
SUSTAINABILITY, v. 10, no. 10, Article no. 3635
Abstract
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.
URI
https://www.mdpi.com/2071-1050/10/10/3635http://repository.hanyang.ac.kr/handle/20.500.11754/120263
ISSN
2071-1050
DOI
10.3390/su10103635
Appears in Collections:
COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
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