Abstract

In this dissertation, I investigate three issues in the area of corporate strategy and corporate social responsibility.

In my first essay, I investigate how corporate social performance (CSP) affects corporate financial performance (CFP), using a panel of the KLD Social Ratings Database. I find that the positive association between CSP and CFP is mainly due to the unobserved heterogeneity specific to firms. I try to control for endogeneity issue by using the enactment of Sarbanes-Oxley Act as an instrumental variable. I argue that spending firm resources to increase CSP affects CFP negatively in the short term. I also find that the positive side of CSP and the negative side of CSP have asymmetric association with CFP.

In the second essay that I jointly wrote with Elizabeth E. Bailey, we investigate how the integration of market and non-market strategies via specialized Board-level committees is associated with CSP. We analyze companies who have engaged their boards of directors in integrated strategy, by establishing voluntary committees to handle public affairs or social responsibility at the Board level. Companies with such committees have significantly higher ratings in both the KLD negative social ratings index and their positive social ratings index. A look at the panel data over the six-year period between 2000 and 2005 suggests that companies that had recently experienced problems in social performance established such committees for mitigation purposes.

In the third essay that I jointly wrote with Joel Waldfogel, we investigate whether history has persistent effect on economic outcomes by looking into the history of chain restaurants in the U.S. Different chain restaurants came to existence at different points in time, penetrating into the new market areas where they faced less competition and expected to reap higher profit. It turns out that the chains that settled down in those new market areas were able to withstand the arrivals of later competitors. As a result, we observe that different chain restaurants are available in areas where current market conditions are very similar, suggesting that history has persisting effects on market outcomes, rendering them path-dependent.