Impact of Controlling Shareholders on Corporate Social Responsibility under External Financial Constraints

This study examines the relationship between the ownership of controlling shareholders and corporate social responsibility in Korea under external financial constraints. Empirical results show that a negative relationship is observed only in firms with fewer external financial constraints, while it is weaker or disappears for firms with more financial constraints. We obtain similar results when we use the level of environmental management as a proxy for corporate social responsibility. These results confirm that external financial constraints act as a monitoring mechanism and mitigate the agency problem of controlling shareholders.