Mandatory CSR expenditure regulation and credit ratings: Evidence from India

This study investigates the impact of mandatory Corporate Social Responsibility (CSR) expenditure on credit ratings for 2759 firm-year observations from 2015 to 2023 in the Indian context. Our findings indicate that compliance with mandatory CSR spending significantly enhances credit ratings, particularly for firms with a history of voluntary CSR engagement. This suggests that rating agencies positively perceive consistent CSR activities, viewing them as indicators of enhanced transparency and reduced default risk, thus improving creditworthiness under the new regulatory environment. Our findings are validated using a Difference-in-Differences framework and an instrumental variable approach to address endogeneity concerns.