사회적 책임 활동은 기업의 위험을 완화시키는가?

As the corporate social responsibility (CSR) is an issue of growing importance in the recent Korean capital market, this paper investigates the effect of it on the inherent uncertainty of firms' management. Understanding of firms’ intrinsic risk is very crucial, as firms make various financial decisions, such as investment and raising capital, based on the risk-return trade-off. For instance, investors demand high required rated of return from firms with high risk, and those firms could raise capital in smooth water when they realize the risk. In addition, firms with high business risk also have high bankruptcy risk, so shareholders and creditors of those firms should grasp such risk in advance. By focusing on the relation between CSR and risk of the firm, we strengthen the understanding of financial benefit and cost from the CSR activities. Between the two competing perspectives of the CSR, we examine which one is empirically supported. One part of the existing studies has positive view on the CSR: it could be a strategy that satisfies various stakeholders (strategic choice hypothesis), and signals high value of the firm to the capital market (product signaling hypothesis). According to them, CSR will help firms with reducing risks and obtaining stable future cash flow. On the contrary, the other part hypothesizes that CSR brings much cost and does not increase the firm value (irrelevance hypothesis). Moreover, as its result is hard to be attained in a short term, managers could over-investment in it to enhance their reputation (overinvestment hypothesis). These hypotheses assume the CSR activities will increase the risk of the firm. Empirically, we confirm that the CSR activities have a significant negative effect on the total risk of the firm, especially the unsystematic risk (firm-specific risk). Moreover, we find that the CSR activities have a significant positive effect on risk-adjusted stock return. This result implies that the risk reduction effect could be considered as the main path of the increase of firm value suggested in previous literatures. In sum, firms with brisk CSR activities are benefited with timely financing and the improvement of business sustainability due to the risk reduction. In the meantime, the risk reduction effect is strongly observed in firms with low asset scale and stand-alone firms. As there are two conflicting views about the CSR activities, we provide firms with strategic implications by presenting empirical findings of benefits from the activities. Additionally, our findings could support the making of policies and the introduction of regulations that encourage the activities.