Mandatory Corporate Social Responsibility: The India Experience

24 Pages Posted: 17 Jan 2017

See all articles by Ronald Geoffrey Bird

Ronald Geoffrey Bird

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN)

Abhishek Mukherjee

Waikato Managment School

Geeta Duppati

Waikato Management School; Waikato Management School

Date Written: January 12, 2017

Abstract

The idea that companies service a wide range of stakeholders dates back to the 19th Century but has gained increasing traction in more recent times. The question is what to do where the corporate sector fails to keep pace with societal expectations. The response of the Indian government was to make it mandatory for large corporations to spend funds on corporate social responsible (CSR) activities. In this paper, we investigate the success of this legislation both for the companies and the intended beneficiaries. We find that the impact of the legislation has fallen short of expectations both in terms of the volume of CSR expenditure generated and the activities to which it has been directed. In particular, we find that the legislation has had a negative effect on the relationship between CSR and profitability which in turn can have a perverse effect on the willingness of companies to spend in this area. We conclude that greater care has to be taken when implementing mandatory CSR if it is to be effective.

Suggested Citation

Bird, Ronald Geoffrey and Mukherjee, Abhishek and Duppati, Geeta, Mandatory Corporate Social Responsibility: The India Experience (January 12, 2017). 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017. Available at SSRN: https://ssrn.com/abstract=2898552 or http://dx.doi.org/10.2139/ssrn.2898552

Ronald Geoffrey Bird (Contact Author)

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+ 612 9514 7716 (Phone)
+ 612 9514 7711 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Abhishek Mukherjee

Waikato Managment School ( email )

Hamilton
New Zealand

Geeta Duppati

Waikato Management School ( email )

Private Bag 3105
Hamilton, 3105
New Zealand
+64 7 838 4477 (Phone)

Waikato Management School ( email )

Hamilton
New Zealand
+64 7 838 4477 (Phone)

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