Is CSR Expenditure Relevant to the Firms in India?

Meditari Accountancy Research

Purpose The purpose of this study is to examine the moderating effect of mandatory corporate social responsibility (CSR) reporting on CSR expenditure and financial performance of listed firms in India. It uses institutional theory to explain the relationship. Design/methodology/approach The study used the Indian stock market as the testing grounds and applied descriptive statistics, hierarchical regression and panel regression with fixed effect assumptions for 800 firm-year observations for the period 2010 to 2019. Findings The study shows a positive and statistically significant association between CSR expenditure and financial performance [return on assets (ROA) and Tobin’s q]. Also, the study shows a positive association between financial performance (ROA and Tobin’s q) and CSR expenditure. Furthermore, the study shows that mandatory CSR reporting leads to an increase in CSR expenditure. Finally, the study shows that mandatory CSR reporting moderates the association between CSR e...

This study examined the impact of Corporate Social Responsibility (CSR) initiatives on the financial performance of selected companies listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) from 2016-2022. Using financial performance metrics such as Return on Equity (ROE), Return on Assets (ROA), net profit margin, and earnings per share (EPS), the analysis leveraged multiple regression to ascertain correlations. CSR initiatives data were extracted from company CSR reports and disclosures under the Companies Act, 2013. The results indicated a statistically significant relationship between the extent of CSR initiatives and financial outcomes. These findings contribute to our understanding of the potential interplay between CSR activities and financial performance, suggesting that strategic CSR initiatives can positively influence a firm's financial health. This insight can assist businesses in aligning their social responsibility objectives with their financial goals.

by Babitha Rohit and Prakash Pinto ,RVIM Journal of Management Research,Vol. 13 | Issue 2 | July - December, 2021

The Companies Act, 2013 made it obligatory for companies’ to spend at least 2% of average net profits of 3 immediately preceding financial years on specified areas of social causes for the betterment of stakeholders and society in general. The present study examines the impact of CSR spending on financial parameters for six sectors, viz. Oil and Gas, Chemicals, Metals and Mining, Consumer durables, Pharmaceutical and Construction/Cement sector comprising of 30 companies’ for six years 2014 - 2020. The results indicate that corporate social responsibility has an impact on financial performance of firms’. Further the impact is more evident for environmentally sensitive sectors than environmentally insensitive sectors.

In 2013, a new law required Indian firms, which satisfy certain profitability, net worth, and size thresholds, to spend at least 2% of their net income on corporate social responsibility (CSR). We exploit this regulatory change to isolate the shareholder value implications of CSR activities. Using an event study approach coupled with a regression discontinuity design, we find that the law, on average, caused a 4.1% drop in the stock price of firms forced to spend money on CSR. However, firms that spend more on advertising are not negatively affected by the mandatory CSR rule. These results suggest that firms voluntarily choose CSR to maximize shareholder value. Therefore,

This study examines whether mandatory CSR expenditure has the same effect on firm performance after years of implementation. The data set consists of 80 firms with 640 firm-year observations on the Bombay Stock Exchange in India from 2013 to 2020 that practised sustainability reporting. This study used panel regression with random effect & fixed effect, and generalized method of moments (GMM) assumptions. The first findings show that mandatory CSR expenditure in the current year negatively affects Tobin q. The second findings show that mandatory CSR expenditure in the lag years (1 to 2 years) has no association with return on assets or Tobin q. The third findings show that mandatory CSR expenditure in the lag years (3 and above) has no association with return on assets or Tobin q. The realignment between voluntary CSR investment and associated benefit mostly happens in lag 1 and 2, but mandatory CSR shows insignificant results. Our results are robust to controlling firm-level variables. Previous studies examined mandatory CSR expenditure on firm performance, but this new study addresses the shorter and longer lag of mandatory CSR expenditure on firm performance. The study's implication suggests the possible acceptability of allowing firms to write CSR expenditure as tax-deductible until the CSR expenditure and the associated benefit are aligned. However, until then, managers must be authorised to spend on CSR activities, knowing there is a safety net when CSR expenditures do not produce positive firm performance in subsequent years.

Journal of Economic Integration

India, has traditionally been involved in various corporate socially responsible (CSR) activities. This paper presents an empirical analysis of CSR activities of some selected public and private organization in India. The key objective of this analysis is to review the companies' CSR investment in sustainability, disclosure, governance, and CSR stakeholders. The Hypotheses development explains the positive significant relationship between CSR and firm performance. Then the methodology section explains sample selection and data source. Using these data, the CSR practices in selected public and private companies are evaluated based on the Global Reporting Initiative guidelines, and a comparative study of the impact of CSR practices on companies' profitability is conducted. The study also focuses on how CSR influences these companies' gross margins, as well as the correlation between environmental concerns and return on investment. The result of this study are appropriate f...

Plethora of researches is conducted to ascertain influence of corporate social responsibility (CSR)on financial performance(FP) of firms, and results vary widely. The reason for such varied findings may be due to erroneous analysis or because of insignificant controlled variables considered for current study.Weintend to explore the relationship between CSR and financial performance in the Indian banking sector. Data have been gatheredfrom 8 banks, for period of 10 years (2009-2018). The result indicates negative impact of CSR on profitability and no impact on the Earning per Share.

Asia Pacific Journal of Management Research and Innovation, 2020

The main aim of this study is to investigate the impact of corporate social responsibility (CSR) on the financial performance of selected companies listed in the BSE, formerly known as the Bombay Stock Exchange in India. This study is purely based upon the secondary data collected from companies’ annual reports and sustainability reports for last three years ranging from 2016–2017 to 2018–2019. The results indicate that the involvement in socially responsible initiatives has a significantly positive effect on the financial performance of the firms. These findings provide insights to the management to assimilate firm’s CSR initiatives with its strategic business policies and, thus, to renovate the business philosophy from a traditional profit-oriented approach to a socially responsible approach.

Independent Journal of Management & Production, 2016

Corporate Social Responsibility (CSR) is a desirable approach considering it reduces risks, increases brand value, improves transparency, and has a possible impact on the financial health of the business. Initiated as an act of philanthropy, it has recently become mandatory as a part of the Companies Act, 2013 in India which mandates CSR spending. The study had an objective to validate that CSR disclosures lead to better financial performance of a company and vice-versa. The study analyzed the relationship between CSR disclosure and financial performance and vice versa using various approaches viz., exploratory to understand the trends and practices and statistical by adopting multiple regression modelling techniques. The results of the study reveal that the company's financial performance (profitability) has a cause and effect relationship with the CSR disclosure and vice versa, which substantiated the theories predicting that CSR can affect the financial performance of the company.

Journal of business ethics, 2010

This study examines whether corporate social responsibility (CSR) towards primary stakeholders influences the financial and the non-financial performance (NFP) of Indian firms. Perceptual data on CSR and NFP were collected from 150 senior-level Indian managers including CEOs through questionnaire survey. Hard data on financial performance (FP) of the companies were obtained from secondary sources. A questionnaire for assessing CSR was developed with respect to six stakeholder groups -employees, customers, investors, community, natural environment, and suppliers. A composite measure of CSR was obtained by aggregating the six dimensions. Findings indicate that stock-listed firms show responsible business practices and better FP than the non-stock-listed firms. Controlling confounding effects of stock-listing, ownership, and firm size, a favorable perception of managers towards CSR is found to be associated with increase in FP and NFP of firms. Such findings hold good when CSR is assessed for the six stakeholder groups in aggregate and for each stakeholder group in segregate. Findings suggest that responsible business practices towards primary stakeholders can be profitable and beneficial to Indian firms.