Corporate Social Responsibility and Asymmetric Information : Evidence from Korean Retail Firms

This paper examines how a Korean retail firm’s social responsibility is related to the degree of asymmetric information. Recent theories expect a negative relationship between a firm’s engagement in socially responsible activities and the degree of asymmetric information. We use the ES score, published by Korean Corporate Governance Service to represent the engagement of Korean retail firm’s socially responsible activities. This paper employs the ordinary least square method to examine the relationship. The publicly listed retail firms are analyzed from 2011 to 2016. The analyst dispersion and price impact measure are used as the proxy variables for the degree of asymmetric information. We find that the ES score shows statistically insignificant or even significantly positive relationship with the measures of information asymmetry. The results depend on the inclusion of firm level control variables. Our results do not support the prior theory expecting a negative relationship between corporate social responsibility and the degree of asymmetric information. Our results suggest potentially a positive relationship between the environmental activity and asymmetric information.