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Does social responsibility improve firm value? Evidence from mandatory corporate social responsibility regulations in India

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  • Nemiraja Jadiyappa
  • Subramanian R. Iyer
  • Pavana Jyothi

Abstract

The debate on the impact of corporate social responsibility (CSR) on firm value is still unsettled. Empirically, research designs cannot unequivocally prove that CSR affects firm value because CSR and firm value could be predetermined. Using a natural experiment, we prove that CSR positively affects firm value. In this study, we use the mandatory CSR spending regulation implemented by India in 2015, as a natural setting. We compare the changes in the firm value during the pre‐ and postregulation period. Our results show that market value increases for firms that were forced to spend on CSR during postregulation period.

Suggested Citation

  • Nemiraja Jadiyappa & Subramanian R. Iyer & Pavana Jyothi, 2021. "Does social responsibility improve firm value? Evidence from mandatory corporate social responsibility regulations in India," International Review of Finance, International Review of Finance Ltd., vol. 21(2), pages 653-660, June.
    • Handle: RePEc:bla:irvfin:v:21:y:2021:i:2:p:653-660
    DOI: 10.1111/irfi.12282
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    References listed on IDEAS

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    Cited by:

    1. Boonlert Jitmaneeroj, 2024. "Value relevance of multifaceted corporate social performance: how do country-specific factors matter?," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-20, December.
    2. Naseem Ahamed & Nitya Nand Tripathi, 2023. "Does mandatory corporate social responsibility expenditure by businesses help their stakeholders?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2292-2303, September.
    3. Nemiraja Jadiyappa & Santosh Shrivastava & Avinash Ghalke, 2023. "Social responsibility, moral hazard, and collateral requirement: Evidence from a quasi‐natural experiment in India," International Review of Finance, International Review of Finance Ltd., vol. 23(1), pages 27-36, March.
    4. Jadiyappa, Nemiraja & Chauhan, Yogesh, 2023. "Mandatory CSR regulation and R&D investments: Evidence from a quasi-natural experiment," Finance Research Letters, Elsevier, vol. 55(PA).

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