ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

A Study on the Impact of Social Contribution Activities on Financial Performance：Focusing on Individual Unit Cooperative A

  • Sung Ook Park Department of Accounting and Taxation, College of Business Administration, Kyung Hee University
  • Seo Hyun Kim Department of Accounting and Taxation, Graduate School, Kyung Hee University
  • Seong Tae Kim Department of Accounting, College of Commerce and Economics, Kyungsung University
  • Jong Tak Lee Department of Accounting and Taxation, Graduate School, Kyung Hee University

Asian Tax Journal Vol. 25 No. 1 (2024), pp. 63-86

Abstract

In response to the rapidly changing economic environment and the needs of consumers, companies are focusing on essential values such as social values for sustainable growth. Accordingly, Cooperative A is making continuous efforts to attract customers through social contribution for each independently operated cooperative. In particular, the social contribution activity cost of Individual Unit Cooperative A refers to the level of expenditure invested to exert a positive influence such as community service, event support, and scholarship payment. These social contribution activities can have a positive impact on competitiveness and financial performance by enhancing the image of a company. As such, this study empirically analyzes the effect of the expenses for social contribution activities currently undertaken by Individual Unit Cooperative A on its financial performance, specifically profitability and growth. In addition, in the case of Individual Unit Cooperative A, there may be differences in financial performance depending on the region as it is an organization that provides financial services through regional mutual ties. Accordingly, the additional analysis verifies the effect of cooperative A’s social contribution activities on financial performance by location. In the empirical analysis results of this study, expenses for social contribution activities of Individual Unit Cooperative A appears to be a ∩－type nonlinear relationship, which increases operating income, net income, and deposits and loans to a certain level. In addition, the impact of expenses for social contribution activities by Individual Unit Cooperative A on profitability seems to exhibit a non－linear ∩－shaped relationship in urban areas, whereas it manifests as a non－linear ∪－shaped relationship in rural areas. Similarly, the effect of these expenses on growth demonstrates a non－linear ∩－shaped relationship in urban areas, but only the impact on deposit growth in rural areas appears to follow a linear relationship. This study is significant in that it provides empirical results based on the decision－making processes of social contribution activities for Individual Unit Cooperative A by presenting the optimal level of expenditure for such activities. Furthermore, this study contributes to proving that efficient management policies such as the social contribution activities of Individual Unit Cooperative A assists the development of the local community.

Keywords

  • Cooperative
  • Social Contribution Activities
  • Nonlinear Relationship
  • Financial Performance

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