Investment and Agency Motives of Corporate Philanthropy: Evidence from Anti-Dumping Initiations

Abstract

This paper investigates the role of stakeholder preference on corporate social responsibility (CSR). We find that Indian firms increase CSR expenses when trade restrictions (Antidumping) are initiated against competing Chinese exports from countries with a high stakeholder preference for CSR. However, when these shocks emanate from countries with a lower stakeholder preference, CSR expenses remain unchanged. Capital investments and R&D of Indian firms increase due to the same shocks, irrespective of their country of origin. Finally, CSR increases firm value only when the demand shocks originate from countries with a higher CSR preference. Collectively, our results provide empirical evidence of investment motives for CSR.