Mandatory CSR expenditure and firm performance
- Resource Type
- Authors
- Pradeep Kumar Gupta; Arunesh Garg
- Source
- South Asian Journal of Business Studies. 9:235-249
- Subject
- Marketing
Cultural Studies
Government
050208 finance
business.industry
Strategy and Management
05 social sciences
Economics, Econometrics and Finance (miscellaneous)
Geography, Planning and Development
Enterprise value
Public sector
Accounting
Private sector
Test (assessment)
0502 economics and business
Corporate social responsibility
Business and International Management
business
Stakeholder theory
050203 business & management
- Language
- ISSN
- 2398-628X
PurposeThis study, based on the instrumental approach of the stakeholder theory, examines the firm performance of public and private sector firms in the mandatory corporate social responsibility (CSR) expenditure regime in India. CSR was legislated in India in the year 2014.Design/methodology/approachThe study hypothesizes that firms which fulfill the mandatory CSR expenditure requirement will have a higher firm performance and uses one-way ANOVA and post-hoc test for analysis. Firm performance is examined with respect to firm value and market performance.FindingsThe instrumental approach of the stakeholder theory is not supported in the mandatory CSR expenditure regime in India. The public sector firms that comply with the mandatory CSR expenditure requirement have a lower firm performance. Further, the private sector firms that meet the mandatory CSR expenditure criterion do not have a significantly different firm performance than the private sector firms that do not fulfill this criterion.Practical implicationsThe study indicates as to why some firms fail to meet the CSR expenditure compliance. It also gives suggestions on how regulators and government agencies can solicit the participation of the Indian firms to undertake CSR initiatives. The study further suggests how firms may reap maximum benefit from the CSR expenditure.Originality/valueSince CSR expenditure has been made mandatory only in the year 2014 in India, hardly any study has examined firm performance in the mandatory CSR expenditure regime in India.