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Corporate social responsibility and cash holdings in India: Evidence from a natural experiment

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  • Jadiyappa, Nemiraja
  • Joseph, Anto
  • Sisodia, Garima
  • Krishnankutty, Raveesh
  • Shrivatsava, Santosh

Abstract

The relationship between CSR and cash holdings is not conclusive from prior studies due to the endogeneity issue. In this study, we use a natural experiment setting, i.e., the implementation of mandatory CSR spending regulation in India in 2015, to test the relationship between CSR and cash holdings. Our results show a positive relationship between CSR and the value of cash holdings. As a result of such positive valuation, we observe that the firms which are required to spend on CSR activities under the Act, increased their cash level in the post-regulation period.

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  • Jadiyappa, Nemiraja & Joseph, Anto & Sisodia, Garima & Krishnankutty, Raveesh & Shrivatsava, Santosh, 2021. "Corporate social responsibility and cash holdings in India: Evidence from a natural experiment," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612319312541
    DOI: 10.1016/j.frl.2020.101581
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    2. Nemiraja Jadiyappa & Mrunal Chavda, 2023. "CSR Regulation and Working Capital Management: Evidence from a Quasi-Natural Experiment," Working papers 573, Indian Institute of Management Kozhikode.
    3. Nemiraja Jadiyappa & Mrunal Chavda, 2023. "Does CSR Regulation affect Financial Policy: A Quasi-Natural Experiment Approach," Working papers 574, Indian Institute of Management Kozhikode.
    4. Ajay, Ranjitha & Jory, Surendranath Rakesh & Syamraj, K.P., 2024. "Advancing understanding of ESG score and executive compensation relationships in the Indian context," Global Finance Journal, Elsevier, vol. 62(C).
    5. Abdelmoneim Bahyeldin Mohamed Metwally & Saleh Aly Saleh Aly & Mohamed Ali Shabeeb Ali, 2024. "The Impact of Corporate Social Responsibility on Cash Holdings: The Moderating Role of Board Gender Diversity," IJFS, MDPI, vol. 12(4), pages 1-22, October.

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