Corporate social responsibility, market competition, and shareholder wealth

This paper examines the association between corporate social responsibility (CSR), product market competition (PMC) and shareholder wealth by analysing CSR and market data from January 2006 to December 2012 (excluding 2009) in Korea. We focus on the role of PMC, which has been ignored in previous studies of CSR. Our empirical analyses indicate that PMC plays a significant role in explaining the relationship between a firm's CSR activity and its stock returns. More specifically, we find that CSR activities significantly increase stock returns when PMC is low. This result implies that when competition is low, the effect of CSR is consistent with the stakeholder value maximisation theory.