Corporate social responsibility spending as a building block for sustainable corporate ethical identity: Lessons from Indian business groups

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We examine the cost implications of using corporate social responsibility (CSR) as a vehicle to build sustainable corporate ethical identity (CEI). CSR investment is recognized as one of the effective channels to promote a firm's CEI. However, excessive CSR could divert resources from other strategic projects, and shareholder may not favor such initiatives. We address this managerial dilemma with a unique Indian CSR regulatory environment. Our results show that firms with greater reputational concerns have a higher proclivity to meet the mandatory CSR investment level but are reluctant to exceed the mandatory CSR limit due to absence of incremental financial benefits.