Chaebol Firms’ Donation Activities and Firm Values

This paper aims to investigate the effects of donation activities of chaebol firms on their firm values. The firm values will vary depending on capital market participants’ view on the donation activities of chaebol firms. To verify this hypothesis, data of firms listed in the Korea Composite Stock Price Index (KOSPI) from 2001 to 2017 are empirically analyzed. Whether a firm is a chaebol firm or not is assessed by whether the firm has been designated as a firm in one of the large business groups announced by the Korea Fair Trade Commission, and firm values are measured by Tobin’s Q and market-to-book value ratio (MTB). The results of analysis indicated that donation activities of chaebol firms were negatively related to firm values. The donation activities of chaebol firms seem to be not positively evaluated in the capital market. This paper is meaningful in that it verified how capital market participants evaluate the donation activities of chaebol firms, which account for a large portion of the South Korean economy. To gain public support, chaebol firms should strive to truly fulfill their social responsibilities.