The Impact of Non-Operating Corporate Social Responsibility Costs on Firm Profitability

This study examines how non-operating corporate social responsibility (CSR) costs affect firm profitability. Unlike prior CSR and ESG studies that rely primarily on ratings or scores, this study adopts an accounting-based perspective by conceptualizing CSR activities as non-operating financial costs explicitly recorded in corporate financial statements. This approach reframes CSR from a normative practice to an observable cost structure. The sample consists of manufacturing firms listed on the KOSPI and KOSDAQ markets in Korea, using firm-year panel data from 2015 to 2024. All continuous variables were winsorized at the top and bottom 1 percentiles. Non-operating CSR costs serve as the key independent variable. Given disclosure limitations in Korean financial statements, non-operating CSR costs are proxied by “other non-operating expenses. Profitability is measured using return on assets (ROA), operating income, and return on equity (ROE). Operating income is included as a benchmark outcome to delineate operating versus non-operating performance effects. The empirical analysis employs descriptive statistics, Pearson correlation analysis, and fixed-effects panel regression models. The results indicate that non-operating CSR costs are significantly associated with firm profitability. However, CSR costs show no statistically significant relationship with operating income. In contrast, CSR costs exhibit a significant association with ROE, suggesting that such expenditures are more closely related to long-term firm value and shareholder-oriented performance. These findings suggest that CSR-related expenditures may generate a trade-off between short-term operational efficiency and long-term shareholder-oriented performance.