A Study on the Relationship between CSR activities and Management Performance : Focusing on manager’s ability
Authors:   Asia-Europe Perspective Association, Cheong Eun-Hui 
Published: December 2024

CSR activities are reactive strategies to enhance the image of the firms or management strategies to promote mutual growth with stakeholders related to sustainable growth of the firms(Kim, 2013). The management strategy of the firm is established and implemented by its managers and management per- formance depends on their ability(Ko et al., 2013). Therefore, the interaction effects of CSR activities and manager’s ability is expected to have a significant impact on management performance as part of the management strategy. Because better managers have the high accuracy of forecasting future prof- its(Baik et al., 2011), if managers prediect high future profit of CSR activites, they will actively participate in CSR activities, at any costs, but if they predict low future profits, they will reduce the costs for CSR activities and consider the impact on management performance. Thus, CSR activities and manager’s ability is expected to have positive interaction effects on management performance.
This study analyzed whether the interaction effects of CSR activities and manager’s ability have sig- nificant impacts on management performance using a sample of KOSPI listed firms over the period 2011-2017. This study uses ROE(return on equity), EPS(earnings per share), sales growth rate, and Tobin’s Q as the indicators of management performance, and KEJI index score as a proxy for CSR activities.
The empirical results indicate that the interaction effects of CSR activities and manager’s ability have significant positive impacts on management performance(ROE, EPS and sales growth rates) in the short and long term. This means that although there is criticism that CSR activities are agent costs for the private interests of managers, the higher the manager’s ability, the more positive the accounting-based indicators such as ROE, EPS and sales growth rates. It can be inferred that because better managers have higher forecast accuracy, the better managers determines the level and scope of CSR activities considering the impact on the management performance. It can be interpreted that the better manager’s ability, the better CSR activities improve shareholder’s profits and sales. However, the interaction effects of CSR activities and manager’s ability don’t have a significant impact on Tobin’s Q in short and long term. These results are consistent with the results of Orlitzky et al.(2003) and Yook and Choi(2011) that CSR activities appears to be more highly correlated with accounting-based indicators than mar- ket-based indicators.
In prior research, the relationship between CSR activities and management performance are mixed of positive and negative results and insignificant results. However, this study is meaningful in proving that the relationship between CSR activities and accounting-based indicators has a significant positive relationship, depending on the manager’s ability, unlike the mixed results of prior research. In addition, it is meaningful to confirm that accounting-based indicators such as ROA, EPS and sales growth rates better reflect the performance of CSR activities than market-based indicators such as Tobin’s Q. It is meaningful to verify the effect on the long-term relationship as well as the short-term relationship between CSR activities and management performance. And there are differences in using various accounting and market-based indicators in measuring management performance.