Corporate Governance and Corporate Social Responsibility
57 Pages Posted: 19 Feb 2021
Date Written: December 5, 2020
We study how corporate governance affects corporate social responsibility (CSR) using the 2013 CSR regulation in India that mandates qualifying firms to spend 2 percent of the pre-tax profits on CSR. Controlling for the endogeneous association of corporate governance and CSR choices, we demonstrate that the formation of CSR committees and appointment of directors with relevant experience (CSR-Directors) increases the compliance to the CSR law by 11 percent. Further, we show that CSR-Directors affect compliance by reducing the cost of compliance. This effect is larger for companies in more competitive industries, companies with higher debt, and companies with no previous history of CSR. Companies with higher CSR compliance gain in value and have increased creditworthiness.
Keywords: Director Expertise, CSR Committees, CSR Law, CSR Strategy
JEL Classification: G34, G39, L14, L25, Q50
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