Corporate Social Responsibility and Its Overall Effects on Financial Performance: Empirical Evidence from Indian Companies

Abstract

Until recently, there was a proliferation of researches conducted all over the world in order to establish an empirical association between CSR activities and financial performance of companies. For instance, in India, section 135 of the Companies Act (2013) prescribes mandatory provisions Indian Companies as follows: two percent of their average net profits made during the three immediately preceding financial years are spent in pursuance of their corporate social responsibility (CSR) policy. Driven by the need for some rigorous and robust empirical evidence, the current study aims at testing the statistical relationship between CSR and corporate financial performance (CFP) of the top 100 companies listed by the National Stock Exchange (NSE) of India. After collecting the required financial data from the respective annual reports of these companies, a factor analysis, as well as a multivariate regression analysis, were carried out and reveal conclusive findings regarding the CSR-CFP relationship. Indeed, even if CSR activities have a significant impact on financial performance, there is a moderate positive association between the concerned variables in that context. Based on the results attained, it would be recommended that Indian corporate firms secure better financial performance by committing themselves in CSR activities.