Mandatory Corporate Social Responsibility and Foreign Institutional Investor Preferences

66 Pages Posted: 8 Jun 2020 Last revised: 25 Apr 2022

See all articles by Partha P. Roy

Partha P. Roy

University of Strathclyde

Sandeep Rao

Dublin City University Business School

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Chandra Thapa

University of Strathclyde

Date Written: May 30, 2020

Abstract

This paper examines whether the heterogeneity of foreign institutional investors (FIIs) matters when investing in socially responsible investee firms. Exploiting a mandated corporate social responsibility (CSR) regulation in India and using manually collected CSR expenditure data, the results of a quasi-natural experiment confirm that firms that comply with the CSR mandate attract more investments from FIIs. However, the heterogeneity of FIIs plays a significant moderating role, as FIIs from civil law origin countries, and those considered to be independent and long-term investors, invest more in mandated CSR firms. Finally, our empirical evidence also indicates that firms that comply with the CSR mandate experience higher long-term market-based valuations in the post-CSR reform period.

Keywords: CSR expenditure, Foreign institutional investors, Legal origin, Independent and long-term investors, Market valuation

JEL Classification: G23, G38, M14

Suggested Citation

Roy, Partha P. and Rao, Sandeep and Marshall, Andrew P. and Thapa, Chandra, Mandatory Corporate Social Responsibility and Foreign Institutional Investor Preferences (May 30, 2020). Available at SSRN: https://ssrn.com/abstract=3614327 or http://dx.doi.org/10.2139/ssrn.3614327

Partha P. Roy (Contact Author)

University of Strathclyde ( email )

199 Cathedral Street
Glasgow, Scotland G4 0QU
United Kingdom

Sandeep Rao

Dublin City University Business School ( email )

Glasnevin Campus
Dublin 9
Ireland

HOME PAGE: http://www.sandeepkrao.com

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

Chandra Thapa

University of Strathclyde ( email )

16 Richmond Street
Glasgow 1XQ, Scotland G1 1XQ
United Kingdom

HOME PAGE: http://https://www.strath.ac.uk/staff/thapachandradr/

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