The Effect of Earnings Persistence on Corporate Social Responsibility(CSR) - A Comparative Study of Medium-sized Firms and Large Firms -

Which Corporate Social Responsibility Performance Affects the Cost of Equity? Evidence from Korea

“…However, it has been pointed out that it is difficult to analyze specifically the relationship with CSR performance, since KEJI index provides information on only 200 firms. Recent studies have used the ESG grades announced by the KCGS [15][16][17][18][19][20]. KCGS covers the largest number of firms among those listed in KOSPI, as well as selected firms listed in KOSDAQ, resulting in reduction of the sample bias.…”

“…A high volatility of stock returns (IVOL) indicates greater risk of unfavorable earnings or returns. Park and Kim [16] argue that corporate CSR plays an important role in lowering the cost of equity by reducing idiosyncratic risks. Therefore, it is expected that, idiosyncratic volatility and cost of equity, will be positively related.…”

“…Most studies that focus on the Korean stock market use the Korea Economic Justice Institute (KEJI) index, developed by the Economic Justice Research Institute as a proxy for CSR performance [12][13][14]. Several recent studies use the environmental management, social responsibility management, and governance (ESG) grades announced by the Korea Corporate Governance Service (KCGS) [15][16][17][18][19][20]. While the KEJI index provides information on only 200 firms, the KCGS announces the ESG grades for all firms listed on Korea Composite Stock Price Index (KOSPI).…”