Does Investment in CSR Activities Enhance Firm Value for Politically Connected Firms? Evidence from India

Abstract

This article examines whether political connections and CSR activities influence firm value in an emerging market. We use panel data of 1,897 firms listed on the National stock exchange (NSE) for 2015–2020 with 11,382 firm-year observations. Around 20% of sample firms in the study are politically connected, with 12% connected through the donation channel and 18% connected through the promoter or firm owner channel. The results show that politically connected firms are actively involved in CSR through spending on various activities. We find that politically connected firms perform better, and investment in CSR activities has a moderating effect on firm value. Our result is consistent when examined using firm-level ESG (Environmental, Social and Governance) data and after controlling for various factors.