Does mandatory corporate social responsibility expenditure affect the financial performance of food and agribusiness firms? Evidence from India

Abstract

PurposeThis paper aims to analyse the effect of mandatory corporate social responsibility expenditure (CSRE) on the performance of food and agribusiness firms in India.Design/methodology/approachThis study is based on the firm-level data collected from the Prowess database of the Centre for Monitoring Indian Economy in the year 2019. The data on key characteristics, business performance and CSRE has been compiled from 362 food and agribusiness firms. The descriptive statistics, t-test for equality of means and Spearman correlation analysis have been undertaken to understand the relationship between mandatory CSRE and firm performance across food and agribusiness sectors.FindingsOut of 362 food and agribusiness firms, 52.2% have reported expenditure in the implementation of social initiatives under their corporate social responsibility. The results show a significant difference in the firm’s characteristics vis-à-vis with and without CSRE. Further, the findings highlight a positive and significant correlation and causal impact of corporate social responsibility (CSR) on return on sales, return on assets and profit after tax.Practical implicationsThe study provides insights for implementing strategic CSR in food and agribusiness firms and gives an adequate justification for incurring CSRE.Originality/valueThis paper increases the understanding of CSR in the food and agribusiness sector. Besides, provisioning mandatory CSR seems to be a beneficial proposition for enhancing a firm’s performance.