Corporate Social Responsibility and Financial Performance: New Evidence from the Korean Market

We examine how corporate social responsibility affects financial performance in the Korean market by examining a new set of data, the ESG score. Using panel regression models, we show that the ESG score is negatively related with a widely used measures of financial performance, ROA and Tobin’s Q, unlike extant studies arguing for the positive relationships. Among the three pillars of ESG performance, the social and governance scores robustly show negative relationships with ROA but the environmental score does not. The consideration of unique Korean governance structure, chaebol, does not change our findings. Our findings generally support the traditional view of corporations but argue against the stakeholder theory.