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Does a Government Mandate Crowd Out Voluntary Corporate Social Responsibility? Evidence from India

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  • SHIVARAM RAJGOPAL
  • PRASANNA TANTRI

Abstract

This study investigates the implementation of a Government of India mandate that requires firms to spend at least 2% of their profits on corporate social responsibility (CSR). The results show that qualifying firms that voluntarily engaged in CSR before the mandate reduce their CSR spending afterward. Despite increasing advertisement expenditure likely to offset the lost signaling value of voluntary CSR, stock prices and operating performance of former voluntary CSR spenders who qualify under the law decline. Our results suggest that regulatory intervention in CSR can both diminish its signaling value and lead to a reduction in voluntary CSR spending.

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  • Shivaram Rajgopal & Prasanna Tantri, 2023. "Does a Government Mandate Crowd Out Voluntary Corporate Social Responsibility? Evidence from India," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 61(1), pages 415-447, March.
    • Handle: RePEc:bla:joares:v:61:y:2023:i:1:p:415-447
    DOI: 10.1111/1475-679X.12461
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