Abstract

This study examines the relationship between corporate social performance (hereafter, CSP) and manager’s investment decision. While CSP has been regarded as a charitable expenditure for the various stakeholders in society from the moral point of view, CSP has recently considered as a strategy to secure a sustainable growth strategy or competitive advantage as a part of investment. Investment decision of a company is one of the most important decisions granted to executives. Depending on whether the investment is appropriate or not, its aftermath is directly linked to long －term survival of the company. If the company invests in CSP for the purpose of long－term growth, corporate executives to do CSP would make an effective investment decision. According to the prior studies, CSP affects the asymmetric information and the quality of accounting information, which in turn affect the efficiency of the investment. If there is a significant difference in the information asymmetry and the earnings quality between higher－CSP companies and lower－CSP companies, this would affect the investment efficiency between them. By examining the relationship between CSP and investment efficiency, this study investigates whether CSP affects the managers’ investment decisions. We find that higher－CSP companies have higher investment efficiency than lower－CSP companies. We also find that when the competition within the industry is high, lower－CSP companies have the strong tendency of over－investment. But higher－CSP companies’ investment efficiency is not affected by industry competition. This study provides evidence that managers of higher－CSP companies make an efficient investment decision for the company rather than opportunistic decisions. While previous studies have stated that CSP is affecting the ethical behavior of financial reporting of managers, this study further suggests that CSP is influencing the non－opportunistic investment decisions of managers.

Keywords

• Corate Social Responsibility
• Investment Efficiency
• Industry Competition.

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