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Does Corporate Social Responsibility (CSR) Create Shareholder Value? Evidence from the Indian Companies Act 2013
In 2013, a new law required Indian firms, which satisfy certain profitability, net worth, and size thresholds, to spend at least 2% of their net income on corporate social responsibility (CSR). We exploit this regulatory change to isolate the shareholder value implications of CSR activities. Using a...
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| Published in: | Journal of accounting research 2017-12, Vol.55 (5), p.1257-1300 |
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| Main Authors: | , |
| Format: | Article |
| Language: | English |
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| cited_by | cdi_FETCH-LOGICAL-c4494-782163b2871f8820514cfdb5810014067fbe7c11582573b33f05ed02a9ea9263 |
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| cites | cdi_FETCH-LOGICAL-c4494-782163b2871f8820514cfdb5810014067fbe7c11582573b33f05ed02a9ea9263 |
| container_end_page | 1300 |
| container_issue | 5 |
| container_start_page | 1257 |
| container_title | Journal of accounting research |
| container_volume | 55 |
| creator | MANCHIRAJU, HARIOM RAJGOPAL, SHIVARAM |
| description | In 2013, a new law required Indian firms, which satisfy certain profitability, net worth, and size thresholds, to spend at least 2% of their net income on corporate social responsibility (CSR). We exploit this regulatory change to isolate the shareholder value implications of CSR activities. Using an event study approach coupled with a regression discontinuity design, we find that the law, on average, caused a 4.1% drop in the stock price of firms forced to spend money on CSR. However, firms that spend more on advertising are not negatively affected by the mandatory CSR rule. These results suggest that firms voluntarily choose CSR to maximize shareholder value. Therefore, forcing a firm to spend on CSR is likely to be sub-optimal for the firm with a consequent negative impact on shareholder value. |
| doi_str_mv | 10.1111/1475-679X.12174 |
| format | article |
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| fulltext | fulltext |
| identifier | ISSN: 0021-8456 |
| ispartof | Journal of accounting research, 2017-12, Vol.55 (5), p.1257-1300 |
| issn | 0021-8456 1475-679X |
| language | eng |
| recordid | cdi_proquest_journals_1962602720 |
| source | EBSCOhost Business Source Ultimate; International Bibliography of the Social Sciences (IBSS); Wiley; JSTOR Archival Journals and Primary Sources Collection |
| subjects | Advertising Companies Corporate responsibility CSR Discontinuity Indian Companies Act 2013 M14 M40 M41 M48 Money Profitability shareholder value Shareholders wealth Social responsibility Stockholders Thresholds |
| title | Does Corporate Social Responsibility (CSR) Create Shareholder Value? Evidence from the Indian Companies Act 2013 |
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