Skip to main content
SpringerLink
Log in

Corporate social responsibility and firm performance: evidence from India’s national stock exchange listed companies

  • Original Article
  • Published:
International Journal of Disclosure and Governance Aims and scope Submit manuscript

Abstract

The paper aims to empirically investigate the influence of corporate social responsibility (CSR) on firm performance in Indian listed firms. We use regression analysis to determine the relationship between CSR and firm performance. Both accounting and market measures of firm performance have been deployed for the purpose of the study. We have found mixed evidence. While CSR has a positive impact on the accounting measure, it has a weak relationship with market-based returns. Our most significant finding in the study is that markets do not perceive the standard mandated CSR spends worthy of a reward. Instead, such spends are considered hygiene whereas expenditure made by firms in excess of the mandated CSR spends is rewarded by markets for their CSR conscious behaviour. We therefore advise the Indian companies to spend beyond the mandated CSR outlays if they are to improve on their market value.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Adapa, S. 2018. Indian smart cities and cleaner production initiatives-integrated framework and recommendations. Journal of Cleaner Production 172: 3351–3366. https://doi.org/10.1016/j.jclepro.2017.11.250.

    Article  Google Scholar 

  • Amaeshi, K., E. Adegbite, C. Ogbechie, U. Idemudia, K.A.S. Kan, M. Issa, and O.I.J. Anakwue. 2017. Corporate social responsibility in SMEs: A shift from philanthropy to institutional works? Journal of Business Ethics 138: 385–400.

    Article  Google Scholar 

  • Aras, G., A. Aybars, and O. Kutlu. 2010. Managing corporate performance: Investigating the relationship between corporate social responsibility and financial performance in emerging markets. International Journal of Productivity and Performance Management 59(3): 229–254.

    Article  Google Scholar 

  • Arora, B., and R. Puranik. 2004. A review of corporate social responsibility in India. Development 47: 93–100.

    Article  Google Scholar 

  • Barnett, M.L., and R.M. Salomon. 2012. Does it pay to be really good? Addressing the shape of the relationship between social and financial performance. Strategic Management Journal 33: 1304–1320.

    Article  Google Scholar 

  • Baughn, C.C., N.L.D. Bodie, and J.C. McIntosh. 2007. Corporate social and environmental responsibility in Asian countries and other geographical regions. Corporate Social Responsibility and Environmental Management 14(4): 189–205.

    Article  Google Scholar 

  • Bhasa, M.P. 2006. Does ownership affect performance? Empirical Evidence from the Indian Pharmaceutical Industry. Finance India 20(3): 913–940.

    Google Scholar 

  • Bird, R., A.D. Hall, F. Momentè, and F. Reggiani. 2007. What corporate social responsibility activities are valued by the market? Journal of Business Ethics 76(2): 189–206.

    Article  Google Scholar 

  • Bowen, H.R. 1953. Social responsibilities of the businessman. New York, NY: Harper.

    Google Scholar 

  • Coad, A., J.R. Holm, J. Krafft, and F. Quatroro. 2018. Firm age and performance. Journal of Evolutionary Economics 28(1): 1–11.

    Article  Google Scholar 

  • Cheng, B., I. Ioannu, and G. Serafein. 2014. Corporate social responsibility and access to finance. Strategic Management Journal 35: 1–23.

    Article  Google Scholar 

  • Chongoo, P. 2017. A longitudinal study of the impact of corporate social responsibility on firm performance in SMEs in Zambia. Sustainability 9: 1300. https://doi.org/10.3390/su9081300.

    Article  Google Scholar 

  • Clarkson, P.M., Y. Li, G.D. Richardson, and F.P. Vasvari. 2011. Does it really pay to be green: Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy 30: 122–144.

    Article  Google Scholar 

  • Cordeiro, J.J., and J. Sarkis. 1997. Environmental proactivism and firm performance: Evidence from security analyst earnings forecasts. Business Strategy and the Environment 6(2): 104–114.

    Article  Google Scholar 

  • Crane, A., D. Matten, and J. Moon. 2008. Corporations and citizenship. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Crifo, P., M. Diaye, and S. Pekovic. 2016. CSR related management practices and firm performance: An empirical analysis of the quantity-quality trade-off on French data. International Journal of Production Economics 171: 405–416.

    Article  Google Scholar 

  • Crisostomo, V., V. Freire, and F. Vasconcellos. 2011. Corporate social responsibility, firm value and financial performance in Brazil. Social Responsibility Journal 7(2): 295–309.

    Article  Google Scholar 

  • Demuijnck, G., and H. Ngnodjom. 2013. Responsibility and Informal CSR in Formal Cameroonian SMEs. Journal of Business Ethics 112: 653–665.

    Article  Google Scholar 

  • El Ghoul, S., O. Guedhami, C.C. Kwok, and D.R. Mishra. 2011. Does corporate social responsibility affect the cost of capital? Journal of Banking and Finance 35: 2388–2406.

    Article  Google Scholar 

  • Commission, European. 2001. Promoting a European framework for corporate social responsibility. Luxembourg: Office for Official Publications of the European Communities.

    Google Scholar 

  • Feng, M., X. Wang, and J.G. Kreuze. 2017. Corporate social responsibility and firm financial performance: Comparison analyses across industries and CSR categories. American Journal of Business 32(3–4): 106–133.

    Article  Google Scholar 

  • Gao, Y., J.Y. Murray, M. Kotable, and J. Lu. 2010. A strategy tripod perspective on export behaviors: Evidence from domestic and foreign firms based in an emerging economy. Journal of International Business Studies 41: 377–396.

    Article  Google Scholar 

  • Garg, P. 2016. CSR and corporate performance: Evidence from India. Decision 43(4): 333–349.

    Article  Google Scholar 

  • Gatsi, J.G., C.A.A. Anipa, S.G. Gadzo, and J. Ameyibor. 2016. Corporate social responsibility, risk factor and financial performance of listed firms in Ghana. Journal of Applied Finance and Banking 6(2): 21–38.

    Google Scholar 

  • Gjølberg, M. 2009. Measuring the immeasurable? Constructing an index of CSR practices and CSR performance in 20 countries. Scandinavian Journal of Management 25(1): 10–22.

    Article  Google Scholar 

  • Godfrey, P.C., C.B. Merrill, and J.M. Hansen. 2009. The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic Management Journal 30: 425–445.

    Article  Google Scholar 

  • Greening, D.W., and D.B. Turban. 2000. Corporate social performance as a competitive advantage in attracting a quality workforce. Business and Society 39(3): 254–280.

    Article  Google Scholar 

  • Gupta, A.D. 2007. Social responsibility in India towards global compact approach. International Journal of Social Economics 34: 637–663.

    Article  Google Scholar 

  • Hammond, S.A., and J.W. Slocum. 1996. The impact of prior firm financial performance on subsequent corporate reputation. Journal of Business Ethics 15(2): 159–165.

    Article  Google Scholar 

  • Hilman, H., and A.H. Gorondutse. 2013. Relationship between perceived ethics and Trust of Business Social Responsibility (BSR) on performance of SMEs in Nigeria. Middle East Journal of Scientific Research 15: 36–45.

    Google Scholar 

  • Jenkins, H., and N. Yakovleva. 2006. Corporate social responsibility in the mining industry: Exploring trends in social and environmental disclosure. Journal of Cleaner Production 14(3–4): 271–284.

    Article  Google Scholar 

  • Jensen, M.C. 1993. The modern industrial revolution, exit and the failure of internal control systems. Journal of Finance 48(3): 831–880.

    Article  Google Scholar 

  • Karmyog Report. 2009. A report on the Karmayog corporate social responsibility ratings 2008 of the 1000 largest companies, India. http://www.karmayog.org/csr. Accessed 14 July 2020.

  • Kim, Y., M.S. Park, and B. Wier. 2013. Is earnings quality associated with corporate social responsibility? Accounting Review 87: 761–796.

    Article  Google Scholar 

  • Kim, Bora, and Seoki Lee. 2020. The impact of material and immaterial sustainability on firm performance: The moderating role of franchising strategy. Tourism Management. https://doi.org/10.1016/j.tourman.2019.103999.

    Article  Google Scholar 

  • Kurokawa, G., and D. Macer. 2008. Asian CSR profiles and national indicators: Investigation through web content analysis. International Journal of Business and Society 9: 1–8.

    Google Scholar 

  • Lungu, J., and A. Shikwe. 2006. Corporate social responsibility practices in small-scale mining on the copperbelt. Ndola: Mission Press.

    Google Scholar 

  • Mahbuba, S., and N. Farzana. 2013. Corporate social responsibility and profitability: A case study on Dutch Bangla bank ltd. International Journal of Academic Research in Business and Social Sciences 4(8): 139–145.

    Google Scholar 

  • Maqbool, S., and M.N. Zameer. 2018. Corporate social responsibility and financial performance: An empirical analysis of Indian banks. Future Business Journal 4(1): 84–93.

    Article  Google Scholar 

  • McWilliams, A., and D. Siegel. 2001. Corporate social responsibility: A theory of the firm perspective. Academy of Management Review 26: 117–127.

    Article  Google Scholar 

  • Mishra, S., and S. Damodar. 2010. Does corporate social responsibility influence firm performance of Indian companies? Journal of Business Ethics 95(4): 571–601.

    Article  Google Scholar 

  • Oeyono, J., M. Samy, and R. Bampton. 2011. An examination of corporate social responsibility and financial performance: A study of the top 50 Indonesian listed corporation. Journal of Global Responsibility 2(1): 100–112.

    Article  Google Scholar 

  • Partners in Change, 2001. Annual Report 2001–2002.

  • Pellegrino, G. 2018. Barriers to innovation in young and mature firms. Journal of Evolutionary Economics 28(1): 181–206.

    Article  Google Scholar 

  • Prasad, M., T. Mishra, and V. Bapat. 2019. Corporate social responsibility and environmental sustainability: Evidence from India using energy intensity as an indicator of environmental sustainability. IIMB Management Review 31(4): 374–384.

    Article  Google Scholar 

  • Raman, R. 2006. Corporate social reporting in India—A view from the top. Global Business Review 7(2): 313–324.

    Article  Google Scholar 

  • Roberts, P.W., and G.R. Dowling. 2002. Corporate reputation and sustained superior financial performance. Strategic Management Journal 23: 1077–1093.

    Article  Google Scholar 

  • Sardana, D., N. Gupta, V. Kumar, and M. Terziovski. 2020. CSR ‘sustainability’ practices and firm performance in an emerging economy. Journal of Cleaner Production. https://doi.org/10.1016/j.jclepro.2020.120766.

    Article  Google Scholar 

  • Singh, D., and J. Ahuja. 1983. Corporate social reporting in India. International Journal of Accounting 18(2): 151–169.

    Google Scholar 

  • Tang, Z., E.H. Clyde, and S. Rothenberg. 2012. How corporate social responsibility engagement strategy moderates the CSR–financial performance relationship. Journal of Management Studies 49(7): 1274–1303.

    Article  Google Scholar 

  • Turyakira, P., E. Venter, and E. Smith. 2014. The impact of corporate social responsibility factors on the competitiveness of small and medium-sized enterprises. South African Journal of Economic and Management Sciences 17: 157–172.

    Article  Google Scholar 

  • von Arx, U., and A. Ziegler. 2014. The effect of corporate social responsibility on stock performance: New evidence for the USA and Europe. Quantitative Finance 14: 977–991.

    Article  Google Scholar 

  • Waddock, S.A., and S.B. Graves. 1997. The corporate social performance–financial performance link. Strategic Management Journal 18(4): 303–319.

    Article  Google Scholar 

  • Waworuntu, S.R., M.D. Wantah, and T. Rusmanto. 2014. CSR and financial performance analysis: Evidence from top ASEAN listed companies. Procedia-Social and Behavioral Sciences 164: 493–500.

    Article  Google Scholar 

  • Wright, P., and S.P. Ferris. 1997. Agency conflict and corporate strategy: The effect of divestment on corporate value. Strategic Management Journal 18: 77–83.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Hyderabad Business School, GITAM University, Hyderabad, India

    Jayasree Mangalagiri

  2. LemonBridge Research, Hyderabad, India

    Malla Praveen Bhasa

Authors
  1. Jayasree Mangalagiri
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Malla Praveen Bhasa
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Malla Praveen Bhasa.

Ethics declarations

Conflict of interest

On behalf of all authors, the corresponding author states that there is no conflict of interest.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Mangalagiri, J., Bhasa, M.P. Corporate social responsibility and firm performance: evidence from India’s national stock exchange listed companies. Int J Discl Gov 19, 144–152 (2022). https://doi.org/10.1057/s41310-021-00138-w

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41310-021-00138-w

Keywords

Search

Navigation