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Impact Of Csr Expenditure Compliance On Firm Value Using P/B-Roe Valuation Model And Instrumental Approach

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  • GUPTA Pradeep Kumar

    (Thapar Institute of Engineering and Technology (Deemed-to-be-University), Patiala)

  • GARG Arunesh

    (Thapar Institute of Engineering and Technology (Deemed-to-be-University), Patiala)

Abstract

This paper examines the impact of corporate social responsibility (CSR) expenditure compliance on firm value in the context of the Indian firms by applying instrumental approach of the stakeholder theory and the P/B-ROE valuation model. The study hypothesizes that CSR expenditure compliance will positively affect the firm value. Price-to-book (P/B) ratio of the firm is used as a proxy of the firm value. The sample of firms is selected from NSE-500 Index companies for the period of five years from 2014-15 to 2018-19 and the method adopted is a portfolio grouping approach to form a cross-sectional portfolio regression model. The results reveal that CSR expenditure compliance negatively influences firm value. Thus, instrumental approach which hypothesizes that CSR initiatives improve firm performance is not supported. However, to form a cross-sectional portfolio regression model by using portfolio grouping approach is found to be more appropriate than the individual cross-sectional regression model.

Suggested Citation

  • GUPTA Pradeep Kumar & GARG Arunesh, 2022. "Impact Of Csr Expenditure Compliance On Firm Value Using P/B-Roe Valuation Model And Instrumental Approach," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 17(2), pages 108-123, August.
    • Handle: RePEc:blg:journl:v:17:y:2022:i:2:p:108-123
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    References listed on IDEAS

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