Mandatory Corporate Social Responsibility Research Articles

Does mandatory CSR disclosure affect enterprise total factor productivity?

Corporate social responsibility (CSR) reports are important carriers of enterprises non-financial information disclosure, which are inextricably related to the production efficiency and performance of enterprises. The objective of this paper is discovering the causal effect of the CSR mandatory disclosure policy and the total factor productivity (TFP) of enterprises. This paper uses the sharp regression discontinuity design based on the micro data of the enterprises to study the impact by taking China's mandatory disclosure policy in 2008 as a quasi-natural experiment. This paper makes some contribution to the impact of mandatory CSR disclosure on enterprise TFP and the mechanism and heterogeneity of this impact. The research draws the following conclusions: First, the CSR mandatory disclosure can significantly improve the TFP of enterprises on the whole, and this effect has the characteristics of long-term and dynamic decline. Second, the mechanism of mandatory disclosure of CSR on TFP is through the mediating effect of R&D and innovation expenditures. Third, the heterogeneity of the impact of CSR mandatory disclosure on TFP is reflected in two aspects: industry and equity nature differences. These conclusions are strongly correlated with the contingent decision-making behaviour of enterprises and give some ideas to the policy makers.

Reprioritising Sustainable Development Goals in the Post-COVID-19 Global Context: Will a Mandatory Corporate Social Responsibility Regime Help?

The impact of COVID-19 on the United Nations Sustainable Development Goals (SDGs) continues to be researched. Initial signals warn of significant setbacks in achieving SDG targets by 2030. The achievement of SDGs could abet improved protection from future pandemics. This article suggests reprioritizing SDGs to facilitate a more robust global response to future pandemics. Specifically, we recommend that SDGs 3, 6, 5 and 4 (in that order) are prioritized in order to optimize efforts at a more inclusive and resilient socio-economic recovery post-pandemic. This paper suggests that mandatory CSR regimes enable governments, in combination with corporate fiscal resources, to influence the selection and progress of these SDGs. The case of India’s mandatory CSR regime is employed to illustrate our position. This study extends the debate on SDGs by raising the possibility of universal concentration on a few critical SDGs.

Financial inclusion, corporate social responsibility and firm performance – analysis of interactive relationship

PurposePrior studies on corporate social responsibility (CSR) and performance have frequently used unidirectional, single-equation regression although the literature recommends the reciprocal association of CSR with firm performance. This paper aims to elucidate the interactive relationship of CSR spending with financial inclusion (FI) and firm performance. The study also explores the moderating impact of the level of FI on the CSR-firm performance relationship.Design/methodology/approachThis study uses a simultaneous equations model to capture the FI, CSR and firm performance relationships and apply a three-stage regression approach and generalised method of moments approach to address possible endogeneity.FindingsThe results confirm a positive association of CSR spending with performance but a negative relationship of FI with performance. This paper also finds that FI negatively moderates the CSR spending-performance relationship.Practical implicationsThe positive impact of CSR spending and the negative impact of FI on performance in mandatory CSR regimes provides valuable input in policy formulation. The results of the study will also be useful to national and international organisations, such as the International Monetary Fund and the World Bank.Originality/valueThis study uses a simultaneous equations model to capture the reciprocal association of CSR spending with firm performance, whereas prior studies on CSR and performance have frequently used unidirectional, single-equation regression. This paper also finds that FI negatively moderates the CSR spending- performance relationship. Including FI and exploring the moderating impact of the level of FI on the CSR-firm performance relationship is novel.

How does corporate social responsibility influence firm financial performance?

PurposeThis paper has three main purposes. First, this paper aims to study the effect of corporate social responsibility (CSR) on firm financial performance. Second, this study aims to examine how mandatory CSR disclosure impacts financial performance. Further, this paper aims to investigate the intervening role of capital structure decisions on the relationship between CSR and financial performance.Design/methodology/approachBased on a sample of French non-financial listed companies over the period 2006–2017, this study uses structural equations modeling and a difference-in-differences approach to highlight these effects.FindingsThis paper finds that CSR has a significant positive association with financial performance. In addition, although the mandate does not require firms to spend on CSR, the socially responsible firms experience an increase in profitability subsequent to the mandate. Finally, this study argues and finds evidence that the relationship between CSR and financial performance is mediated through the capital structure channel.Originality/valueThis paper contributes to the literature in several ways. First, the study provides a new research stream by examining the effect of mandatory CSR disclosure on firm financial performance. Second, is to knowledge the first to examine whether and how CSR affects financial performance through the capital structure channel.

The effect of mandatory corporate social responsibility on firm’s cash holdings

ABSTRACT This study investigates the effect of mandatory Corporate Social Responsibility (CSR) disclosure on corporate cash holdings in China. We use the enactment of a policy mandating a group of firms to disclose their CSR activities as a quasi-natural experiment and find that mandatory CSR disclosure can significantly reduce corporate cash holdings. We identify three channels and their corresponding mechanisms through which mandatory CSR disclosure may affect corporate cash holdings. Mandatory CSR disclosure decreases corporate cash holdings by alleviating financing constraints, improving corporate governance and increasing risk-taking capacity. Further analysis indicates that the reduction in cash holdings due to mandatory CSR disclosure improves firm value.

Mandatory Corporate Social Responsibility Explanation

This article describes the development of the implementation of Corporate Social Responsibility (CSR) around the world from several CSR published works. The development of global CSR implementation starts voluntary to mandatory. Based on the discussion, CSR is an obligation (mandatory) for companies in carrying out company operations and is part of the company's investment. Thus its benefits can be enjoyed by the company in the long term.

Examining the Impact of E-Government on Corporate Social Responsibility Performance: The Mediating Effect of Mandatory Corporate Social Responsibility Policy, Corruption, and Information and Communication Technologies Development During the COVID era.

During the Covid-19 era, this research will explore and analyze the link between e-government and corporate social responsibility. In addition, mandatory corporate social responsibility, institutional quality, information and communication technology, and corruption as mediators will also be explored in this study. This research seeks to answer the issue of how e-government affects corporate social responsibility and how other mediating variables might influence this connection. Furthermore, this study developed a total of 13 hypotheses based on these questions, 4 of which have mediating effects. The theoretical underpinning for the proposed study paradigm is provided by stakeholder theory, which has been established based on prior literature. The general philosophy is positivism, and the research has a deductive nature. The information was gathered from 305 managers across four industries: information technology, online services, online education, and logistics and supply chain. Data was collected using a random convenience sampling approach. The Partial Least Square Sequential Equation Modeling (PLS-SEM) research analysis approach was applied in this study for the analysis. The measurement step demonstrated that all constructs and indicators are valid and trustworthy enough to be utilized in the future. The results of the structural model evaluation revealed that e-government had a negative influence on corporate social responsibility, with three of the four mediating roles proving to be completely mediated. As a result, the government and relevant stakeholders should take these results into account when formulating e-government policies.

Mandatory corporate social responsibility in India: reporting reality, issues and way forward

PurposeSince 2013, the Indian Companies Act Section 135 has mandated corporate social responsibility (CSR) reporting by Indian central public sector enterprises (CPSEs). CSR reporting is regulated by multiple Government of India ministerial agencies, each requiring different formats and often different data. This study aims to understand the impact of these multiple regulatory bodies on CSR reporting by Indian CPSEs; evaluate the expectation gap between regulators and the regulated; and investigate the compliance burden on CPSEs.Design/methodology/approachAn interview-based approach was adopted to evaluate the perspectives of both regulators and regulated CPSEs on the impact of the new regulations on CSR reporting quality. The authors use the lens of institutional theory to analyse the findings.FindingsDriven by coercive institutional pressures, CPSEs are overburdened with myriad reporting requirements, which significantly negatively impact CPSEs’ financial and human resources and the quality of CSR activity and reports. It is difficult for CPSEs to assess the actual impact of their CSR activities due to overlapping with activities of the government/other institutions. The perceptions of regulators and the regulated are divergent: the regulators expect CPSEs to select more impactful CSR projects to comply with mandatory reporting requirements.Originality/valueThe findings of this study emphasise the need for meaningful dialogue between regulators and the regulated to reduce the expectation gap and establish a single regulatory authority that will ensure that the letter and spirit of the law are followed in practice and not just according to a tick-box approach.

Does Mandatory Corporate Social Responsibility Disclosure Affect Share Price Responses to Earnings Announcements? Evidence from China

ABSTRACTWe utilize the mandatory corporate social responsibility (CSR) disclosure regulation in China as an exogenous shock to evaluate the impact of such disclosures on investors as end users of accounting information based on the analysis of share price responses to earnings announcements. Specifically, we observe that firms with mandated CSR disclosure experience an increase in earnings response coefficient and a decrease in post-earnings announcement drift. Furthermore, these effects are greater among CSR-sensitive industries, state-owned enterprises, and lower accounting quality firms. Additional analysis also reveals that these effects vary by the quality of CSR disclosure and CSR performance. These findings suggest that CSR disclosure provides incremental information that is useful for investors to assess firms' future prospects and uncertainties. A broader implication of our study is that mandating CSR disclosure could improve market information efficiency and benefit outside investors.Data Availability: All data are publicly available from sources indicated in the text.JEL Classifications: G38; M14; M41.

Did mandatory CSR compliance impact accounting Conservatism? Evidence from the Indian Companies Act 2013

In 2013, India became the first country in the world to require firms to spend two percent of their average profit on corporate social responsibility (CSR) activities. Taking advantage of this unique event, we examine how the mandatory CSR compliance impacts conditional accounting conservatism of Indian firms. We find a positive relation between CSR compliance and conditional accounting conservatism and this relation is stronger for firms that have stronger governance and weaker for family firms. Further, we find that current period accounting conservatism is negatively related to next period CSR spending. Our results are robust to a battery of tests and are consistent with the notion that Indian firms enhance accounting conservatism to decrease earnings to minimize CSR compliance costs. In other words, while policy makers may have intended to use legislation to increase CSR activities by Indian firms, our results suggest that firms use accounting policies and negative accruals strategically to mitigate CSR spending.

Integrating corporate social responsibility criteria into executive compensation and firm innovation: International evidence

Using a large sample of firms from 30 countries, we find that the integration of corporate social responsibility (CSR) criteria into executive compensation is associated with greater innovation output in countries around the world. We also find that this positive association is stronger in countries with weak stakeholder orientation, countries with weak legal environments, and countries without mandatory CSR reporting requirements. These findings suggest that CSR contracting can compensate for institutional voids and high stakeholder demand for CSR, and thereby foster firm innovation. The results of the channel analyses suggest that a greater level of employee innovation productivity, enhanced managerial risk-taking, and greater responsiveness of firms' R&D investment to their investment opportunities play a significant role in the association between CSR contracting and innovation. Overall, our study demonstrates in a global context the importance of linking executive compensation to nonfinancial criteria in addition to financial criteria, and it documents the heterogeneity in the effect of CSR contracting on firm innovation in different countries.

Forcing responsibility? Examining earnings management induced by mandatory corporate social responsibility: evidence from India

Purpose This study aims to investigate the impact of mandatory corporate social responsibility (CSR) spending legislation on the earnings management strategies of firms. Design/methodology/approach The authors use panel data regression models to analyze the data for this study. This study covers the post-legislation period, which spans over five years from the financial year ending March 2015 to the financial year ending March 2019. Findings The results show that firms manipulate accounting measures to avoid breaching the cut-off criteria for mandatory CSR. In particular, the results show that firms operating around the operating revenue threshold misclassify operating revenue as non-operating revenue. In contrast, firms operating around the net worth and net profit thresholds do downward real and accrual earnings management. These results are consistent with several robustness measures. Originality/value To the best of the authors’ knowledge, this is the first study that examines the impact of mandatory CSR spending on earnings management.

Air pollution, human capital and corporate social responsibility performance: evidence from China

ABSTRACT This study examines the impact of air pollution on a firm’s adherence to the principles of corporate social responsibility (CSR), and the role of human capital in this relationship. Basing our analysis on a sample of listed companies in China between 2014 and 2017, we employ regression discontinuity design (RDD) and the two-stage instrumental variable method (IV-2SLS) in determining that air pollution has a significant, negative impact on CSR performance. This negative relationship is more pronounced in companies that are subject to mandatory CSR disclosure requirements, compared to those required to make only voluntary disclosures. In addition, further analysis demonstrates that executives with an overseas background, or with a working experience of finance, choose to work in cities with superior air quality, enhancing their companies’ CSR credentials. Moreover, the increase in the total labour force in these cities, as a result of better air quality, motivates local companies to improve their CSR performance to retain and attract higher calibre employees. Our study provides original evidence that air pollution generates negative economic externalities, and can alter firm behaviour, through the medium of human capital.

How mandatory corporate social responsibility can help governments with development goals

AbstractMany governments seek the private sector to meet their development goals. One possible means to enlist this support is to impose mandatory or “hard” corporate social responsibility (CSR) requirements on large companies. To shed light on how mandatory CSR could be helpful in this regard, we study the case of India, where the government has required large companies to spend a fraction of their income toward development as CSR since 2014. We analyzed the expenses of leading Indian companies and found statistically significant similarities among these companies in their spending pattern across the different categories, which we interpret as isomorphism. By looking for the government's motivation and the companies' motivations—both perceive the priorities in unmet social needs—we present a conceptual model to explain this isomorphism in CSR expenditure across different categories. The model suggests that governments may find mandatory CSR helpful to direct corporations in achieving development goals.

Family Firms and Compliance with Mandatory CSR: Evidence from a Natural Experiment

Our study leverages a natural experiment setting based on the mandatory corporate social responsibility (CSR) regulation in India to address whether and how CSR spending is influenced by ownership by a family and the heterogeneity in family ownership. Using a longitudinal panel dataset of 1,102 listed firms in India, our study finds that, driven by the motivation to pursue legitimacy-seeking activities and build family legacy, family firms comply better with the CSR regulation. The compliance is further improved for firms belonging to family business groups. We further test our theoretical mechanism by examining the modes of CSR implementation and find that family business group firms and legacy firms tend to use substantive (direct or in-house) modes of implementation. Given the nature of our research setting where the CSR regulation as well as what qualifies for CSR is clearly defined and externally imposed, our study is able to overcome some of the limitations of prior research viz., endogeneity concerns, and inconsistencies in the operationalization of CSR.

Mandatory CSR and sustainability reporting: economic analysis and literature review

This study collates potential economic effects of mandated disclosure and reporting standards for corporate social responsibility (CSR) and sustainability topics. We first outline key features of CSR reporting. Next, we draw on relevant academic literatures in accounting, finance, economics, and management to discuss and evaluate the potential economic consequences of a requirement for CSR and sustainability reporting for U.S. firms, including effects in capital markets, on stakeholders other than investors, and on firm behavior. We also discuss issues related to the implementation and enforcement of CSR and sustainability reporting standards as well as two approaches to sustainability reporting that differ in their overarching goals and materiality standards. Our analysis yields a number of insights that are relevant for the current debate on mandatory CSR and sustainability reporting. It also points scholars to avenues for future research.

Extractive Sector Stakeholders' Perspectives of the Extractive Sector Transparency Measures Act (ESTMA)*

ABSTRACTThis commentary considers stakeholder perspectives of Canada's Extractive Sector Transparency Measures Act (ESTMA). In 2015, ESTMA was enacted under Canada's corporate social responsibility (CSR) strategy as a mandatory CSR reporting initiative requiring the financial disclosure of all payments relating to the commercial development of oil, gas, or minerals around the globe. Despite ESTMA's intended purpose to improve transparency and deter corruption within the global extractive sector, little remains known about the acceptance of this mandatory CSR initiative by extractive sector stakeholders. Success of this government initiative likely hinges upon stakeholder acceptance of ESTMA. This study reports the results of a survey of industry stakeholders, including managers, practitioners, and academics, on whether ESTMA positively or negatively affects transparency, financial performance, reputation, decision making, and the ability of firms to do business abroad. Findings indicate stakeholders in Canada believe ESTMA has improved transparency and has had a positive effect on the reputation of Canadian firms in the extractive sector with minimal costs to financial performance, changes to decision making, or effect on ability to conduct business abroad. Using a Canadian context, the findings provide important insights for regulators and practitioners, among other stakeholders, to better understand the effects of mandatory CSR initiatives, as well as the use of legislated financial disclosures as a CSR mechanism.

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

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.

Does CSR Expenditure and Sustainability Reporting Improve Firm Performance? Mandatory CSR Regimes in India

This paper aims to investigate whether firms that comply with corporate social responsibility (CSR) expenditure and undertake voluntary sustainability reporting will have lower systematic risk and higher stock returns—the proxies for measuring firm performance—in mandatory CSR regimes in India. The instrumental approach of stakeholder theory asserts that firms considering stakeholders’ interests, including societal interest, are likely to show better firm performance compared to others. Therefore, on the basis of such a theory, this study attempts to link sustainability reporting and CSR compliance with firm performance. One-way Analysis of Variance (ANOVA) and post-hoc tests were used to examine the proposed hypotheses and analyze the results for firms meeting the criteria of CSR provisions and are listed in the National Stock Exchange (NSE) of India. The period of study covers four financial years from 2015–16 to 2018–19, after India mandated CSR expenditure on April 1, 2014. Results reveal that markets value those firms that meet the mandatory CSR expenditure requirement but do not undertake voluntary sustainability reporting. The findings offer important implications for firms, investors, and policymakers of countries, including those that are planning for CSR legislation.

Institutional ownership and violations of mandatory CSR regulation

India is one of the very few national jurisdictions to introduce a regulation mandating spending on corporate social responsibility (CSR) activities. Although the directive has increased CSR spending significantly, it has experienced a widespread noncompliance. This paper examines the effect of institutional ownership on the likelihood of violations of the mandatory CSR regulation. Using a sample of over 4000 firm-year observations, we find that an increase in institutional ownership significantly increases firms’ compliance with the mandatory CSR expenditure requirement. This result is robust to the alternative definitions of mandatory CSR violations, alternative model estimation approaches, addressing endogeneity and reverse causality biases and controlling for firms’ group affiliation, and ownership of foreign investors and government.