Article2022

Does a Government Mandate Crowd Out Voluntary Corporate Social Responsibility? Evidence from India

81 citations0/0 files storedJournal of Accounting Research

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Corporate Social Responsibility and Sustainability

Abstract

ABSTRACT This study investigates the implementation of a Government of India mandate that requires firms to spend at least 2% of their profits on corporate social responsibility (CSR). The results show that qualifying firms that voluntarily engaged in CSR before the mandate reduce their CSR spending afterward. Despite increasing advertisement expenditure likely to offset the lost signaling value of voluntary CSR, stock prices and operating performance of former voluntary CSR spenders who qualify under the law decline. Our results suggest that regulatory intervention in CSR can both diminish its signaling value and lead to a reduction in voluntary CSR spending.

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References

2003Corporate Social and Financial Performance: A Meta-Analysis 2010Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting 2013Corporate social responsibility and access to finance 2017Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis 2006Corporate Social Responsibility: Strategic Implications*2009Individual and Corporate Social Responsibility 2000Corporate Social Performance As a Competitive Advantage in Attracting a Quality Workforce 2004Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause

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