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Journal of Accounting Research Vol. 61 No. 1 2023

Does a Government Mandate Crowd Out Voluntary Corporate Social Responsibility? Evidence from India

Shivaram Rajgopal1; Prasanna L Tantri2

1 Department of Accounting Columbia University Graduate School of Business · 2 Indian School of Business

Abstract

This study investigates the implementation of a Government of India mandate that requires firms to spend at least 2% of their profits on corporate social responsibility (CSR). The results show that qualifying firms that voluntarily engaged in CSR before the mandate reduce their CSR spending afterward. Despite increasing advertisement expenditure likely to offset the lost signaling value of voluntary CSR, stock prices and operating performance of former voluntary CSR spenders who qualify under the law decline. Our results suggest that regulatory intervention in CSR can both diminish its signaling value and lead to a reduction in voluntary CSR spending.

DOI
10.1111/1475-679x.12461
Volume
61
Issue
1
Pages
415-447
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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