CSR Spending Research Articles

An Investor Perspective on the Black Box of Corporate Social Responsibility

In summarizing the findings of their recent study, the authors report findings that suggest that not all socially responsible corporate policies are likely to have the same effect on a company's ownership and value. Using environmental policy as their proxy for CSR activities, the authors classify corporate environmental practices into two categories: (1) actions that reduce the likelihood of harmful outcomes by reducing the corporate exposure to environmental risk; and (2) actions that enhance companies' perceived ‘greenness’ through investments that go beyond both legal requirements and any conceivable risk management rationale.Although both groups of environmental practices are likely to be viewed as socially beneficial, corporate expenditures that reduce a firm's environmental risk exposure are more likely to benefit shareholders by limiting the risk of losses arising from environmental accidents, lawsuits, and fines—and possibly thereby reducing the firm's cost of capital. By contrast, corporate expenditures that enhance the firm's perceived greenness by going beyond legal requirements and risk management rationales could actually reduce shareholder value.Consistent with this hypothesis, the authors find that institutional investors tend to own smaller than average percentages of both companies the authors identify as ‘toxic’ and make limited efforts to manage their environmental risk, and companies they label ‘green’ with low environmental risk exposure but relatively high CSR spending on the environment. At the same time, such investors hold larger‐than‐average positions in ‘neutral’ companies with relatively low, or effectively managed, environmental risk exposures and limited investment in ‘greenness’ programs. The authors also find that both toxic and green companies have lower (Tobin's Q) valuations than neutral companies, and that otherwise toxic companies that effectively manage their environmental risk exposures have higher valuations.

Mandatory CSR Spending and Its Impact on Profitability: An Analysis on NSE–200 Companies

Corporate Social Responsibility is a contribution by companies to the society for utilising the naturally available resources for increasing their profitability. The Companies Act 2013 made it mandatory to spend at least 2 percent of the Average Net Profit, if the company has net worth of INR 500 Crore or more or turnover exceeds INR 1000 Crore or a Net Profit of INR 5 Crore or more during financial year. The study used the secondary data from the annual reports available from NSE website from which 3 years’ profitability and CSR contribution of sample companies were collected. Statistical and financial tools such as percentage, trend analysis, correlation and regression were used for analysing the data. The NSE 200 companies were classified as Banking, Financial Services(excl: Banking), Construction, Power, Manufacturing, Mining and Non-Financial Services. The study reveals that the amount spent by NSE 200 companies on CSR activities are showing an increasing trend which is a good sign for the society whereas companies are not spending 2 percent on net average profit. The study suggests for setting up of separate department under the Ministry of Corporate Affairs for ethical utilization of mandatory CSR funds.

Mandatory corporate social responsibility in India and its effect on corporate financial performance: Perspectives from institutional theory and resource‐based view

AbstractThe enactment of the Companies Act of 2013 in India mandating CSR spending is a regulatory pressure from the government. Institutional theory suggests that such regulatory pressure has an impact on firm heterogeneity and consequently on the competitive advantage of a firm. On the other hand, a firm's resources and capabilities like R&D expertise, advertising intensity and staff welfare& training intensity leads to firm heterogeneity and helps firm to achieve competitive advantage. So, this paper combines the insights of the resource‐based view with the institutional perspective from the organization theory to study the combined impact of both on financial performance. The study was conducted on Indian firms which belonged to the top thousand firms by sales for the time‐period between the years 2010 and 2018. The data was collected from CMIE Prowess database.

Social Investment by PSU in North East Region of India

Corporate social responsibility has gained much importance in the changed business environment in India. A large number of big corporate houses have set up their Trust and Development Foundations for initiating CSR activities. Even some of the Corporate Houses embarked upon corporate social responsibility initiatives and at the later stage, they developed a full-fledged institute / organization committed towards social development. There has been a progressive increase in social investment by the Corporate Houses in the country. Large MNCs like Tata Group, ITC, Ranbaxy, Infosys, Microsoft, Dr. Reddy's Laboratory, etc. have endeavored to create a better social order by investing hugely in social development. However, Tata Group has emerged to be the pioneer in the field as it has comparatively larger social investment. A number of institutions and social development organizations are being supported by Tata Group in the field. The present paper highlights the CSR spending by PSUs in north east region of India.

Consumer's response to CSR activities: Mediating role of brand image and brand attitude

AbstractCorporate social responsibility (CSR) is a well‐touted term in management disciplines that connects the business goals and societal values. CSR is used as a strategic approach that gives competitive differentiation through coagulation of both business and overarching societal goals. Organizations believe that goodwill created by CSR activities bestows the strategic competitive advantage and sustainable development. The objective of the study is to measure the impact of CSR activities on purchase intention either directly or indirectly; for this purpose, the study has administered a structured questionnaire and collected responses from Indian citizens purchasing products from FMCG companies topping the CSR spending list and used structural equation modeling to validate the results. The findings suggest that customers process CSR details unconsciously and may not remember the explicit detail, but they are more likely to include the brand in the consideration set evokedby positive attitudes trailing behind.

Effect of CSR Spending on Profitability of Indian Banks: A Case Study of Selected Private Banks

Effect of CSR Spending on Profitability of Indian Banks: A Case Study of Selected Private Banks

A comparative analysis of mandatory CSR spending by Indian companies

Abstract With the revamping of Companies Act, 2013, India has witnessed a new dimension of CSR for the companies. Now CSR has been made mandatory for Indian companies of a particular financial strength. With this backdrop of mandatory CSR, an attempt has been made in the current paper to examine whether there is statistical difference in the actual CSR spending of companies across industries. For this purpose, a sample of 50 companies divided into five industries is taken. CSR spending for accounting year 2014-15 has been taken. One-way ANOVA has been used to make the analysis which is carried out on SPSS version 20. On the basis of results, the study concludes that industries differ significantly with respect to CSR spending by companies in those industries.

An Explorative Study on Mandatory CSR Spending with Reference to Section 135 of Companies Act, 2013

This paper tries to explore the present status of CSR spending mandated by section 135 of the Companies Act, 2013 by NSE Nifty 200 companies by using simple percentage analysis. It is found that most of the selected companies are adhering to the CSR policy of allocating 2% of their average three years’ pretax profits. Overall an average of Rs. 6054.02 that is (1.86%) out of 2% limit has been spent; whereas, remaining Rs.1023.93 (0.31%) is kept unspent. Some companies like GAIL India Ltd. even spend more than 2% of their Average pretax profits and some companies had CSR amount unspent. The state wise classification, of CSR activities, showed most of the companies concentrated their CSR activities only on few developed States like Maharashtra, Tamil Nadu etc. showing region wise disparity in the implementation of CSR activities. Industry wise, analysis of CSR activities showed that electricity and manufacturing industries spent more than the actual CSR expenditure to be incurred. Whereas, other industries like financial service, mining, constructions and real estate, services (other than financial) left part of their CSR amount unspent. Manufacturing industries tops the contribution on a broad set of issues like education, health care and sanitization, sustainable livelihood, social causes and others. Out of NSE 200 companies, Reliance Industries Ltd. tops the list with highest CSR spending. Reliance Industries Ltd. had allocated had allocated 0.34% and 84% more than the two percent of CSR expenditure to be incurred as per the Companies Act, 2013. The study tries to put forward the need for the compulsory spending of the allocated CSR amount and also the proportionate distribution of CSR amount and activities among all states and union territories without sticking to the local areas where they operate. The paper suggests policy changes and amendment to the section 135 of the Companies Act in order to promote balanced regional growth and development throughout Indian States and Union territories.

CSR Disclosure by Asia-Pacific Banks: Evidence from Comparative Assessment against India's Compulsory CSR Law

India’s new corporations law (2013) introduced a unique provision mandating CSR spending. This paper evaluates the before and after effects of CSR spending in four major Indian banks from 2005 to 2015. It is compared with four major banks from Japan, Australia, and China. We designed a legal index and analysed the content of CSR disclosures. The research demonstrates that countries with a higher legal index had consistently higher CSR disclosure index scores and actual CSR activity reported in detail. This research also finds that based on company reporting media, there is marginal change in CSR spending in Indian banks and minimal improvement in the reporting quality following change in legislation in 2013. Our findings reveal a small but significant legalisation in the disclosure content following the enactment of section 135. However, poor drafting and poor institutional context revealed by India’s low legal index score shows high levels of auto-interpretation and creative compliance. The section in its current form is failing to promote ethically responsible behaviour and not generating an ethical obligation to obey the law in spirit. These findings are of value to policy makers – to reform the law, to socialise corporations and CEOs, to design enforcement mechanisms, and generate ethical behaviour.

Determinants and Consequences of Corporate Social Responsibility: Evidence from the Revision of the Company Act in India

India is the first country to introduce mandatory CSR spending for eligible firms, based on the revision of the Companies Act in 2013. In this paper, I explore the effects of the revision of the Companies Act in India on the likelihood of a firm's CSR participation and its profit. It is the first work to investigate the effects of the provision of mandatory CSR. The results show that the revision increased the eligible firms' CSR incurrence by 2.3 percent-age points, compared to ineligible firms. The findings also indicate that the revision is effective to increase the eligible firms' profits by 3.5 percent, compared to the ineligible firms. Therefore, I suggest that profit-maximizing CSR and private provision of public goods through mandatory CSR are valid in India.

CSR Spending and its Relationship with Share Prices (With Special Reference to Top Indian Auto Ancillary Companies in Light of Companies Act 2013)

CSR Spending and its Relationship with Share Prices (With Special Reference to Top Indian Auto Ancillary Companies in Light of Companies Act 2013)

Impact of Companies Act 2013 on the CSR expenditure

Moving from a voluntary to an obligatory regime, the enactment of Section 135 of the Companies Act 2013 is an ambitious attempt made that mandates some specific companies to disclose their CSR spending. This paper attempts to study the pattern of CSR spending after the enactment of the new law. Major observations were that 2014, being the initial year of implementation, did not observe much change in the CSR policies of the companies, however, in 2015, considerable changes were observed as companies started adapting to the new policies. The study also focused on the relationship, if any existed, between the corporate governance parameters and corporate social responsibility activities that a company undertakes. Multivariate regression was used for the purpose of analysis. Results depicted that financial variables significantly and positively impacted the CSR expenditure of the company in both the years of study, 2014 and 2015. However, in the year 2015, it was observed that one of the CG variable, i.e., board size significantly impacted the amount of company's CSR expenditure other than the financial variables PAT and size. Thus, it was concluded that corporate governance and financial variables together impacted the CSR expenditure that the company intended to spend.

Impact of Companies Act 2013 on the CSR expenditure

Moving from a voluntary to an obligatory regime, the enactment of Section 135 of the Companies Act 2013 is an ambitious attempt made that mandates some specific companies to disclose their CSR spending. This paper attempts to study the pattern of CSR spending after the enactment of the new law. Major observations were that 2014, being the initial year of implementation, did not observe much change in the CSR policies of the companies, however, in 2015, considerable changes were observed as companies started adapting to the new policies. The study also focused on the relationship, if any existed, between the corporate governance parameters and corporate social responsibility activities that a company undertakes. Multivariate regression was used for the purpose of analysis. Results depicted that financial variables significantly and positively impacted the CSR expenditure of the company in both the years of study, 2014 and 2015. However, in the year 2015, it was observed that one of the CG variable, i.e., board size significantly impacted the amount of company's CSR expenditure other than the financial variables PAT and size. Thus, it was concluded that corporate governance and financial variables together impacted the CSR expenditure that the company intended to spend.

UTBIs: A Solution for Educated Unskilled Work-force in India

The purpose of the paper is to analyse the need of corporate sector to spend on Business Incubators in ‘Knowledge India’ under mandatory 2 per cent CSR spending. This study points out the scarcity of updated training institutions to harness the skills of educated youth, which can be met through CSR. Database of RBI and Census helped in establishing the link between education and economic growth. Data from UGC report, AICTE report are used to show the demand and supply of higher education. Wheebox and NASSCOM reports are used to show employability ratio of Indian youths. Start-up India portal is used to get information regarding UTBIs. CSR funding can play more important role towards increasing employability of educated mass in India through business incubators than directly spending in education. There is excess supply of seats in general, technical and management seats all over India compared to demand, suggesting the need for diversification of CSR fund towards other channels like business incubators to facilitate employability. Since profitable companies are bound to spend 2 per cent of their three year average net profit on CSR, this paper adds to the knowledge that companies should take initiative to reduce educated unemployment by focusing on business incubators.

Societal Impact of CSR Initiatives of Companies in Kerala

The study adopts qualitative approach to find out the CSR spending pattern by the companies in Kerala and the main initiatives adopted by the companies in Kerala and the impact these initiatives have on the society and environment with reference to the archival documents collected from multiple sources including the annual and CSR reports from these companies, reports prepared by the researchers and professional firms. It was found that even though the number of companies for which the CSR rule is applicable is less in Kerala, the impact of CSR initiatives executed by these companies are enormous on the society. It helped to improve the quality of life by supporting hospitals, schools, efficient water and energy management, construction of roads and buildings, pollution control, sophisticated methods for waste management, new technologies and quality seeds for farming, sustainable practices in the operations and processing activities.

Corporate social responsibility and firm market performance: a study of Indian listed companies

This paper uses the flow of information relating to the introduction of mandatory CSR expenditure in India as the vehicle to measure investor perceptions of the impact of such spending on company profitability. We use both event study and regression analysis methodology and find that when mandatory CSR spending was first mooted in mid-2008, investors started out with the expectation that more CSR expenditure would increase future corporate profitability. However, by the time that the legislation was passed in August 2012, these expectations had changed to where they expected the opposite to hold.

Should India Follow the Global CSR Trend of Financing Tertiary Education?

Abstract Purpose - The purpose of the paper is to analyse the need of corporate sectors to spend in tertiary education sector of India under mandatory CSR spending. Design – Database of RBI and Census helps in establishing link between education and economic growth. Data from UGC report, AICTE report are used to show the demand and supply of higher education. Wheebox and NASSCOM report are used to show employability ratio of Indian youths. CSR funding can play more important role towards increasing employability of educated mass in India than directly spending in education. Findings – The result show that there exist no significant correlation between education and economic growth using education expenditure but some amount of correlation between number of literates and GDP. There is excess supply of seats in general, technical and management seats all over India compared to demand. Research limitations – Data on CSR spending by Indian companies are not readily available for facilitating research activity. It’s only been a year since CSR has been made mandatory, so companies are yet to decide their choice of area. Practical implications – Since profitable companies are bound to spend 2% of their three year average net profit on CSR, this paper add to our knowledge that companies should take initiative to reduce educated unemployment by focusing on training and skill development. Originality – This study points out the scarcity of updated training institutions to harness the skills of educated youth which can be met by CSR. Keywords – CSR, Tertiary Education, Training and Skill Development

Corporate Social Responsibility by Small and Medium Enterprise

Businesses today have realised that, in order to continue thriving, they have to adopt a more holistic and inclusive business model which has a direct correlation with business performance. Companies are now expected to discharge their stakeholder responsibilities and societal obligations, along with their shareholder-wealth maximization goal. The article is inferential descriptive in nature glimpse into the concept of CSR, The study analyze the CSR activities of 891 private and public sector Indian companies, their contribution to CSR, Correlation of sale and CSR spending, and relationship between company strategies with CSR activities. Article concludes with suggestive areas as scope for CSR for SME sector.

Who Decides on What to Spend in CSR? Moving from Compulsion to Consensus

With CSR spending becoming mandatory in some prominent economies, quantum of spend is increasingly becoming a non issue. Instead spending right has acquired prominence. Ever since policy makers mulled the idea of making CSR spending compulsory, there appears to be rush and panic in the business world to spend on CSR activities that gives them the best return on their social investment. The debate is on for decades now, as to who should decide on what to spend and how much? For long in the name of CSR activities businesses have been spending on initiatives that were either a part of owner’s choice or were easy to identify and implement, mostly avoiding the views of stakeholders inside as well as outside. This paper attempts to address broadly the issue of stakeholder confidence and preference in a CSR initiative. The paper suggests a model of engagement of stakeholders both within and outside of a business for the roll out of a CSR initiative.

Mandatory Corporate Social Responsibility: An Unwarranted Burden on Business

The Companies Bill of 2012 in India is one of the key legislations introduced in the recent past introducing a mandatory provision of CSR spending by certain companies. The approach of mandatory CSR spending is highly controversial and raises questions like whether mandatory CSR satisfies Constitutional norms.