Effects of Mandatory Corporate Social Responsibility (CSR): Evidence from the Revision of the Company Act in India
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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 profits. 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 percentage points, compared to the 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.
Abstract
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 profits. 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 percentage points, compared to the 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.