Corporate social responsibility, visibility, reputation and financial performance: empirical analysis on the moderating and mediating variables from Korea

Purpose - This paper aims to substantiate the mechanism through which corporate social responsibility (CSR) affects financial performance (FP). Specifically, this paper focuses on the moderating effect of visibility and mediating effect of reputation in the relationship. Design/methodology/approach - This paper investigates 175 Korean firms from 2010 to 2012 that have been listed in the Korean Economic Justice Index for all three years. The hypotheses are tested using various measures of visibility and the Korea's Most Admired Company index as proxy for reputation. The logistics regression and the ordinary least square are used. Findings - This paper initially demonstrates that the visibility moderates the correlation between CSR and reputation. On this finding, it further proves that CSR has positive effect on the long-run FP, measured in the Tobin's Q, both directly and indirectly through reputation. However, the influence is irrelevant in the short run. In sum, visibility moderates the correlation between CSR and reputation, which mediates the CSR-FP relationship in the long run. Practical implications - This paper argues for the importance of visibility in practicing CSR, especially when reputation building and financial benefit is sought through CSR. Originality/value - Despite its strategic importance, the visibility of CSR has not been sufficiently studied. Moreover, as scholars have recently suggested that the CSR-FP relationship is rather indirect, there is even more significance in investigating the moderating and mediating variable. Hence, with the intuitive results, this paper lays an integral foundation in the literature.