CSR as Investment: An Analysis of Ownership Structure and Firm Performance

CSR can be considered as an investment which is decided by the owners of the firm, and it can affect the performance of the firm. In this paper, we try to analyse how spending in CSR is related to the ownership pattern and firm performance in India. First, we analyse the CSR expenditure of Bombay Stock Exchange (BSE)-listed Indian firms and try to look at the changes in the number of firms actually spending on CSR over the years 2010–2015 due to the mandate on CSR spending in the Companies Act of 2013. Second, we analyse how the ownership structure, firm size and leverage of a firm affect its CSR expenditure. Finally, we look at the relationship between the performance of a firm and the CSR spending in these years. We use 176 listed firms in the BSE sourced from Centre for Monitoring Indian Economy’s (CMIE) PROWESS database. We find that CSR spending and institutional ownership share have a positive relationship while the leverage of the firm has a negative relationship with CSR spending. We also find that CSR spending has a circular causation with firm performance. It has a significant and positive influence on the firm value while the firm value affects CSR spending positively.