The impact of excess CSR expenditure on firm value and dividend payout in India: an analysis using firm age and size dynamics

Purpose - The paper looks at the impact of excess amount of CSR expenditure (CSRE) in relation to mandatory CSRE in an Indian context on dividend payout (DP) and firm value (FV) where CSRE is mandatory, as well as how this relationship varies between firms based on their age and size. Design/methodology/approach - A sample of the 657 companies listed on the National Stock Exchange (NSE) from 2014–15 to 2020–21 is used in the study, for which spending on CSR was mandatory. A two-step generalised method of the moment is employed to examine the relationship between the variables of interest. Findings - The results show that excess CSREs neither increase the firm’s valuation nor benefit shareholders' economic benefits, i.e. dividend distribution. However, a deeper analysis reveals that excess CSRE is positively associated with FV in the case of smaller firms and also positively corresponds with DP in the case of younger firms. Originality/value - The present study explicitly considers the excess CSR spending beyond the mandated requirements. It investigates whether such spending contributes to firms improving their valuation and explores its connection to DPs. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-02-2024-0136