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Corporate Social Responsibility and Firm Performance: Indian Evidence

Author

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  • Sudershan Kuntluru

    () (Indian Institute of Management, Kozhikode)

Abstract

With effect from 1 April 2014, India’s new Companies Act 2013 makes it mandatory for certain firms to spend a certain minimum amount on Corporate Social Responsibility (CSR) activities. In this study, the impact of mandatory CSR spending on firm performance is examined based on the data for 1460 firm years for the period 2015 to 2018. It is hypothesized that CSR spending has a positive impact on firm performance measured in terms of ROA and ROE. Logit and Probit models are used to estimate the impact of CSR on performance of firms. Contrary to the expectations, the empirical results show that CSR spending has negative impact on performance (ROA/ROE) subsequent to the CSR spending made mandatory in India. It implies that the mandatory CSR spending targets are at the expense of shareholders returns. The findings are useful to regulators, managers and investors.

Suggested Citation

  • Sudershan Kuntluru, 2019. "Corporate Social Responsibility and Firm Performance: Indian Evidence," Working papers 317, Indian Institute of Management Kozhikode.
  • Handle: RePEc:iik:wpaper:317
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    Keywords

    Firm performance; Corporate Social Responsibility; Mandatory CSR; India;

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