CSR activities and internal capital markets: Evidence from Korean business groups

Abstract This study examines the effect of business group structures on corporate social responsibility (CSR) performance of Korean firms. We find that the chaebol affiliation is, on average, positively related to CSR performance. We attribute this phenomenon to two main elements—CSR corporate foundations (or headquarters) and a spillover effect within the chaebol business group. Conversely, family control is found to be negatively associated with CSR performance. Furthermore, we find a positive relation between CSR performance and the firm value measured by Tobin's Q. Our results suggest that CSR headquarters seem to play an important role in improving CSR performance through the efficient allocation of internal resources. Finally, the group-level financial donations, an important CSR activity, seem to have a spillover effect on CSR performance within the business group. This result is consistent with internal capital markets being efficiently utilized by Korean business groups.