Abstract
In this study, we focus on the corporate social responsibility (CSR) management of Korean firms and examine whether their CSR costs (particularly environmental protection and social contribution costs) are properly and effectively managed. Results of the study suggest that the disclosure of environmental capital and social contribution spending does not appear to be a function of quantitative materiality, on average and across time. It is also shown that environmental conservation costs (ECC) and social contribution costs (SCC) demonstrate symmetric behavior while R&D costs show asymmetric behavior, which implies that when sales are decreasing, ECC and SCC decrease proportionately but R&D costs decrease less than the percentage of sales decrease. SCC is stickier for firms that have a share of foreign investment, which implies that foreign investors require management to increase or maintain SCC. CSR activities measured with ECC, SCC, and R&D costs do not change as the ownership of major shareholders changes. Finally, no difference has been found between environmentally sensitive industries and non-sensitive industries in terms of the cost behavior of environmental conservation and social contribution activities.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
This report was published in 2016 based on a survey of 100 corporate managers and 50 experts in charge of CSR , which was conducted by BISD (Business Institute of Sustainability Development) in Korea .
- 2.
Costs are termed anti-sticky if they increase less when activity rises than they decrease when activity falls by an equivalent amount (Weiss 2010).
- 3.
Adjustment costs refer to the costs of altering the level of output or the costs associated with making any changes within a firm. Examples are costs for hiring a new employee and costs of lost production in the event of layoffs. All firms have some types of adjustment costs, especially when they seek to increase efficiency.
- 4.
In contrast, ECC has the characteristics of both capital expenditure and operational expenses.
- 5.
Environmental sensitive industries include food, textile, paper, plastics and rubber, chemical, mining, petroleum, energy, primary metal, utilities, and resource (Davidsdottir and Fisher 2011).
- 6.
This is the credit and financial information service database by NICE group in Korea .
- 7.
This is the cyber financial data library operated by FnGuide company.
- 8.
The ABJ regression model was the model used by Anderson et al. (2003) in their first study of cost stickiness. Many follow-up studies used the same model.
References
Aggarwal R, Klapper L, Wysocki PD (2005) Portfolio preferences of foreign institution investors. J Bank Financ 29(12):2919–2946
Anderson MC, Banker RD, Janakiraman SN (2003) Are selling, general, and administrative costs “sticky”? J Account Res 41(1):47–63
Anderson MC, Banker RD, Huang R, Janakiraman SN (2007) Cost behavior and fundamental analysis of SG&A costs. J Acc Audit Finan 22(1):1–28
Balakrishnan R, Gruca T (2008) Cost stickiness and core competency: a note. Contemp Account Res 25(4):993–1006
Balakrishnan R, Peterson M, Soderstrom N (2004) Does capacity utilization affect the “stickiness” of cost? J Acc Audit Finan 19(3):283–299
Banker RD, Chen L (2006) Predicting earnings using a model based on cost variability and cost stickiness. Account Rev 81:285–307
Banker RD, Johnston HH (1993) An empirical study of cost drivers in the U.S. airline industry. Account Rev 68(3):576–601
Banker RD, Byzalov D, Threinen L (2013) Determinants of international differences in asymmetric cost behavior. Working paper, Temple University
Banker RD, Byzalov D, Ciftci M, Mashruwala R (2014) The moderating effect of prior sales changes on asymmetric cost behavior. J Manag Account Res 26(2):43–79
Barnea A, Rubin A (2006) Corporate social responsibility as a conflict between share- holders, Working paper, University of Texas at Austin
BISD (2016) 2016 CSR Trend of Korea, Business Institute of Sustainability Development
Brown WO, Helland E, Smith JK (2006) Corporate philanthropic practices. J Corp Finan 12:855–877
Calleja K, Steliaros M, Thomas D (2006) A note on cost stickiness: some international comparisons. Manag Account Res 17:127–140
Chan-Fishel M (2002) Survey of climate change disclosure in SEC filings of automobile, insurance, oil and gas, petrochemical, and utilities companies. Friends of the Earth US, Washington, DC
Chen CX, Lu H, Sougiannis T (2012) The agency problem, corporate governance, and the asymmetrical behavior of selling, general, and administrative costs. Contemp Account Res 29(1):252–282
Cho CH, Freedman M, Patten DM (2012) Corporate disclosure of environmental capital expenditures. Account Audit Account J 25(3):486–507
Christmann P (2000) Effects of ‘Best Practices’ of environmental management on cost advantage: the role of complementary assets. Acad Manag J 43(4):663–680
Claessens S, Djankov S, Lang LHP (2000) The separation of ownership and control in East Asian corporations. J Financ Econ 58:81–312
Clarkson PM, Li Y, Richardson GD (2004) The market valuation of environmental capital expenditures by pulp and paper companies. Account Rev 79(2):329–353
Davidsdottir B, Fisher M (2011) The odd couple: the relationship between state economic performance and carbon emission economic intensity. Energy Policy 39(8):4551–4562
FASB (1975) Materiality: discussion memorandum. Stamford
FASB (1980) SFAC 2 concepts statement No. 2 qualitative characteristics of accounting information. Issue Date 5/1980
Fisman R, Heal G, Nair VB (2006) A model of corporate philanthropy, Working paper, University of Pennsylvania
Goyal A (2006) Corporate social responsibility as a signaling device for FDI. Int J Econ Bus 13:145–163
Gupta S, Miranda K, Parry I (1995) Public expenditure policy and the environment: a review and synthesis. World Dev 23(3):515–528
Hassel L, Nilsson H, Nyquist S (2005) The value relevance of environmental performance. Eur Account Rev 14:41–61
Johnston D (2005) An investigation of regulatory and voluntary environmental capital expenditures. J Account Public Policy 24(3):175–206
Kaplan RS, Cooper R (1998) Cost & effect: using integrated cost systems to drive profitability and performance. Harvard Business Press, Boston
Kim M, Prather-Kinsey JJ (2010) An additional source of financial analysts’ earnings forecast errors: imperfect adjustments for cost behavior. J Acc Audit Finan 25(1):27–51
Lee T (1984) Materiality: a review and analysis of its reporting significance and auditing implications. Auditing Practices Committee of the CCAB, London
Lee KH, Herold DM (2016) Cultural relevance in corporate sustainability management: a comparison between Korea and Japan. Asian J Sustain Soc Responsib 1–21
Lee KH, Min B, Yook K (2015) The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance. Int J Prod Econ 167:1–11
Leuz C, Nanda D, Wysocki P (2003) Investor protection and earnings management. J Financ Econ 69:505–527
Min S (2011) An efficiency analysis of Korea’s CGEI and IPEP in the manufacturing industries. J Environ Policy 20(2):61–93
Ministry of Environment (2015) ECOREA environmental review 2015. Korea
Noreen E, Soderstrom N (1997) The accuracy of proportional cost models: evidence from hospital service departments. Rev Acc Stud 2:89–114
Orlitzky M, Schmidt FL, Rynes SL (2003) Corporate social and financial performance: a meta-analysis. Organ Stud 24(3):403–441
Pinkse J, Kolk A (2010) Challenges and trade-offs in corporate innovation for climate change. Bus Strateg Environ 19:261–272
Subramaniam C, Weidenmier ML (2003) Additional evidence on the sticky behavior of costs. Working Paper
Sueyosh T, Goto M (2009) Can environmental investment and expenditure enhance financial performance of US electric utility firms under the clean air act amendment of 1990? Energy Policy 37:4819–4826
Wang W, Lu W, Wang S (2014) The impact of environmental expenditures on performance in the U.S. chemical industry. J Clean Prod 64:447–456
Weinhofer G, Hoffmann V (2010) Mitigating climate change – how do corporate strategies differ? Bus Strateg Environ 19:77–89
Weiss D (2010) Cost behavior and analysts’ earnings forecasts. Account Rev 85(4):1441–1471
Wood D, Loss DG (2006) Environmental social controls and capital investments: Australian evidence. Account Financ 46(4):677–695
Wu ML (2006) Corporate social performance, corporate financial performance, and firm size: a meta-analysis. J Am Acad Bus 8(1):163–171
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 Springer International Publishing AG
About this chapter
Cite this chapter
Yook, KH., Kim, IW. (2018). Cost Behavior of Environmental Protection and Social Contribution Activities: Korean Evidence. In: Lee, KH., Schaltegger, S. (eds) Accounting for Sustainability: Asia Pacific Perspectives. Eco-Efficiency in Industry and Science, vol 33. Springer, Cham. https://doi.org/10.1007/978-3-319-70899-7_8
Download citation
DOI: https://doi.org/10.1007/978-3-319-70899-7_8
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-70898-0
Online ISBN: 978-3-319-70899-7
eBook Packages: Earth and Environmental ScienceEarth and Environmental Science (R0)