Does social responsibility improve firm value? Evidence from mandatory corporate social responsibility regulations in India

The debate on the impact of corporate social responsibility (CSR) on firm value is still unsettled. Empirically, research designs cannot unequivocally prove that CSR affects firm value because CSR and firm value could be predetermined. Using a natural experiment, we prove that CSR positively affects firm value. In this study, we use the mandatory CSR spending regulation implemented by India in 2015, as a natural setting. We compare the changes in the firm value during the pre- and postregulation period. Our results show that market value increases for firms that were forced to spend on CSR during postregulation period.