Management Overconfidence and CSR Activities in Korea with a Big Data Approach

We examined the relationship between management characteristics and corporate social responsibility (CSR) and this relationship was differentiated by the level of corporate governance. Our analysis was undertaken in firms listed on the Korean Stock Exchange (KSE) from 2006 to 2015. We employed Ordinary Least Square (OLS) regression after clustering the standard errors at the firm level in order to examine these relationships. The KEJI (Korea Economic Justice Institute) index was used as a proxy for CSR and a big data-based proxy estimated from multimedia was used as the level of advertising. We showed that there is a positive relationship between overconfident management and CSR activities. We then categorized the CSR activities as primary and social activities and found that overconfident management is more aggressive in primary CSR activities. In addition, overconfident management makes fewer CSR expenditures when the management is in a chaebol firm but promotes more CSR advertisement. This finding indicates that chaebol affiliation controls overinvestment in CSR activities but promotes CSR advertisements by overconfident managers. Similarly, we found consistent results with overconfident owner-managers. Prior literature on CSR activities focuses on the impact of CSR activities on firm performance. In this paper, we elucidated the determinants of CSR activities, so that this research contributes to firms’ decision-making about sustainable management. Our estimation of CSR variables with big data approaches will also guide future research on this issue. We expect our study to be used as a reference for decision-making by relevant authorities and stakeholders.