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The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea

by 1 and 2,*
1
Division of Accounting/Tax and Management Information Systems, Kyonggi University, Suwon 16227, Korea
2
College of Business, Sangmyung University, Seoul 03016, Korea
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(5), 1901; https://doi.org/10.3390/su12051901
Received: 9 January 2020 / Revised: 4 February 2020 / Accepted: 19 February 2020 / Published: 3 March 2020
(This article belongs to the Section Economic and Business Aspects of Sustainability)
The purpose of this paper is to examine the association between corporate environmental responsibility (CER) activities and investment efficiency as measured by overinvestment, and whether the industry-level competition affects this association. We investigate a sample of 2285 non-financial firms with fiscal year-end in December listed in the Korea Stock Exchange Market for the period of 2013–2018, measuring the investment efficiency by overinvestment model. Using environmental scores from the Korea Corporate Governance Service to measure CER activities, we show that, on average, firms can decrease overinvestment behavior through CER activities in South Korea. Moreover, in firms in a highly competitive market, the negative association between CER activities and overinvestment is pronounced, indicating that strong product market competition are effective in monitoring managerial opportunistic behavior. These results are robust, even after controlling for different setting and alternative CER. These findings also suggest that the relationship between CER and overinvestment appears to be benefit firms that are sound and sustainable and honestly present their financial information. View Full-Text
Keywords: corporate environmental responsibility (CER); product market competition; overinvestment behavior corporate environmental responsibility (CER); product market competition; overinvestment behavior
MDPI and ACS Style

Lee, J.; Kim, E. The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea. Sustainability 2020, 12, 1901. https://doi.org/10.3390/su12051901

AMA Style

Lee J, Kim E. The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea. Sustainability. 2020; 12(5):1901. https://doi.org/10.3390/su12051901

Chicago/Turabian Style

Lee, Jaehong, and Eunsoo Kim. 2020. "The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea" Sustainability 12, no. 5: 1901. https://doi.org/10.3390/su12051901

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