Social expenditure, business responsibility reporting score and firm performance: empirical evidence from India

Abstract

Purpose The purpose of this study is to examine the impact of corporate social responsibility (CSR) expenditure and business responsibility report (BRR) on a firm’s financial performance. Additionally, the study explores whether CSR expenditure and firm performance are related linearly or otherwise. The study also assesses the influence of mandating CSR expenditure on a firm’s performance. Design/methodology/approach The study is set in India and uses a nine-year data set from 165 companies listed on the Bombay Stock Exchange. Data compilation and analysis are done by using content analysis and panel data regressions. Findings The main findings of the study are that the effect of CSR expenditure on firm performance in India is non-linear and can be characterized as parabolic for investigated firms. While some performance indicators suggest a U-shaped relationship, others show an inverted U-type pattern, making a definitive conclusion elusive in either direction. BRR scores themselves have a positive impact on firm performance. Mandatory CSR expenditure affects the financial performance negatively, but the market performance improves in general. Originality/value The study provides new insights on the relationship between CSR expenditure, BRR scores and firm performance from India, which is not only a notable emerging market but also has other gripping characteristics. It has a prolific history of philanthropy, and yet, it is the first country in the world to mandate CSR expenditure in recent times. The equation between reported economic progress and general quality of life remains intriguing, and yet the number of studies on the effects of CSR expenditure on firm performance are no match to the volume of ongoing and completed works in more developed markets. This study attempts to trim the gap and provide some useful insights for managers, policymakers and stakeholders, apart from prompting further research.

The Relationship of Corporate Social Responsibility with Business Performance—A Bibliometric Literature Review

“…In [128], the trends in and future potential of gamification in the context of business innovation was explored. The study by [129] also investigated CSR expenditure and its impact on a business' financial performance. In [130], the essential role of green CSR in corporate performance was assessed, whereas [131] analyzed the practice of CSR among high-growth industries.…”

“…The study by [113] investigated financial institutions' commitment to sustainability and ESG. The work of [129] focused on CSR expenditure, business responsibility reporting and firm performance. The study by [151] examined multi-stakeholder initiatives and internationalization among multinationals, while [152] used data mining techniques to study CSR and the corporate financial performance of internet enterprises.…”

Identifying the dimensions of philanthropic CSR in the FMCG sector: agenda for the sustainability of business

“…There is empirical evidence showing a positive correlation between shareholders’ wealth or profitability and CSR (Al Amosh et al , 2023; Tudway and Pascal, 2006; Orlitzky et al , 2003). The most obvious intent behind this motive is the improvement in financial performance (Bhatnagar et al , 2023).…”