This paper studies the empirical relation between corporate social responsibility (CSR) and corporate financial performance in Korea using a sample of 1222 firm-years during 2002—2008. We measure corporate social responsibility by both an equal-weighted CSR index and a stakeholder-weighted CSR index suggested by Akpinar et al. (2008). Corporate financial performance is measured by return on equity, return on assets, and Tobin’s Q. We find a positive and significant relationship between corporate financial performance and the stakeholder-weighted CSR index, but not the equal-weighted CSR index. This finding is robust to alternative model specifications and several additional tests, providing evidence in support of instrumental stakeholder theory.
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