Purpose Prior 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/approach This 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. Findings The 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 implications The 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/value This 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.

This paper explains cross-market variations in the degree of return predictability using the extreme bounds analysis (EBA). The EBA addresses model uncertainty in identifying robust determinant(s) of cross-sectional return predictability. Additionally, the paper develops two profitable trading strategies based on return predictability evidence. The result reveals that among the 13 determinants of the cross-sectional variation of return predictability, only value of stock traded (a measure of liquidity) is found to have robust explanatory power by Leamer's (1985) EBA. However, Sala-i-Martin's (1997) EBA reports that value of stock traded, gross domestic product (GDP) per capita, level of information and communication technology (ICT) development, governance quality, and corruption perception are robust determinants. We further find that a strategy of buying (selling) aggregate market portfolios of the countries with the highest positive (negative) return predictability statistic in the past 24 months generates statistically significant positive returns in the subsequent 3 to 12 months. In the individual country level, a trading rule of buying (selling) the respective country's aggregate market portfolio, when the return predictability statistic turns out positive (negative), outperforms the conventional buy-and-hold strategy for many countries.