The Study on Nonlinear Impact of CSR on Firm Market Value

Abstract

This study aims to investigate the non-linear relationship between corporate social responsibility (CSR) and market value of companies listed in the Stock Exchange of Thailand between 2016 and 2017. We employ factor analysis to determine the significant CSR dimensions, and then examine the relationship between the CSR dimensions and Tobin’s Q in the same year (2016), and the following year (2017)

Results from the factor analysis demonstrate two important CSR dimensions, namely, 1) the development of employees, environment and community; and 2) corporate governance, reporting, and anti-corruption policies. The development of employees, environment and community has a U-shaped relationship with Tobin’s Q in both years. Meanwhile, the other dimension of corporate governance, reporting and anti-corruption policies is not associated with Tobin’s Q. These results imply that an implementation on the policy-level does not have sufficient impact to increase firm value from the investor’s perspective, but development in employee, environment, and communities does. The results support the resource-based theory suggesting that attention to human resource development leads to a competitive advantage in terms of development and solutions for environment and community; eventually resulting in brand image and long-term firm value.