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Strategic Relations between Corporate Social Responsibility and Partial Privatization Policy with Foreign Penetration

Xu, Lili and Lee, Sang-Ho (2020): Strategic Relations between Corporate Social Responsibility and Partial Privatization Policy with Foreign Penetration.

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Abstract

This study considers a strategic interplay between corporate social responsibility (CSR) and privatization policy in a mixed market, and investigates the impact of the order of sequential games. We compare the different timeline of the game between the privatization-then-CSR and the reverse case of CSR-then-privatization, and highlight the significant role of the foreign shareholding ratio of the CSR-firm. We show that partial privatization is always optimal regardless of the timeline of the game, but the privatization-then-CSR yields a lower (higher) degree of privatization while a higher (lower) level of CSR than the CSR-then-privatization when the foreign penetration is sufficiently low (high). We also show that privatization-then-CSR can be a unique equilibrium in an endogenous timing game but socially desirable only when the foreign penetration is neither sufficiently low nor high.

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