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Institutional ownership and violations of mandatory CSR regulation

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  • Rahman, Md Lutfur

Abstract

India is one of the very few national jurisdictions to introduce a regulation mandating spending on corporate social responsibility (CSR) activities. Although the directive has increased CSR spending significantly, it has experienced a widespread noncompliance. This paper examines the effect of institutional ownership on the likelihood of violations of the mandatory CSR regulation. Using a sample of over 4000 firm-year observations, we find that an increase in institutional ownership significantly increases firms’ compliance with the mandatory CSR expenditure requirement. This result is robust to the alternative definitions of mandatory CSR violations, alternative model estimation approaches, addressing endogeneity and reverse causality biases and controlling for firms’ group affiliation, and ownership of foreign investors and government.

Suggested Citation

  • Rahman, Md Lutfur, 2021. "Institutional ownership and violations of mandatory CSR regulation," Economics Letters, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002445
    DOI: 10.1016/j.econlet.2021.109967
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Institutional ownership; Mandatory CSR expenditure; Violations; India;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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