How Corporate Social Responsibility Affect Asymmetric Information in the Korean Market?

This paper examines how corporate social responsibility affects the degree of asymmetric information. Recent theory predicts a negative relationship between corporate social responsibility and the measures of asymmetric information. This paper employes the total ESG score, published by Korean Corporate Governance Service to proxy a firm’s engagement in socially responsible activities. The degree of information asymmetry is captured by the analyst dispersion and price impact measure. The ordinary least square method is adopted for the sample of publicly listed Korean firms from 2011 to 2016. We find that the total ESG score is negatively related to the price impact measure without the inclusion of control variable. Yet, the total ESG score rather shows a positive significant relationship with the price impact measure after controlling for firm-level covariates. The ESG score does no show significant relationship with the measure of analyst dispersion. This set of results generally argues against the prior theory predicting a negative relationship between corporate social responsibility and asymmetric information. The role of firm-level covariates seems to be important in estimating the relationship.