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

  • Hee Sub Byun Korea Deposit Insurance Corporation Cheonggyechun-no 30, Jung-gu, Seoul, 100-180, Korea
  • Ji Hye Lee Korea University Business School 145 Anam-ro, Seongbuk-gu, Seoul, 136-701, Korea
  • Kyung Suh Park Korea University Business School 145 Anam-ro, Seongbuk-gu, Seoul, 136-701, Korea
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 disappears for firms with greater financial constraints. We reach a similar conclusion 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.

  • Hee Sub Byun
  • Ji Hye Lee
  • Kyung Suh Park
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 disappears for firms with greater financial constraints. We reach a similar conclusion 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.
Controlling shareholders,Conflict of interest,Corporate social responsibility,External financialconstraints,Korea.