Impact of Corporate Governance on Corporate Social Responsibility in India—Empirical Analysis

Part of the CSR, Sustainability, Ethics & Governance book series (CSEG)


In continuation of the previous chapter on corporate social responsibility in India, this chapter further extends the discussion by investigating the determinants of CSR activities and expenditure in large Indian corporate. Unlike developed countries, India has a specific corporate governance problem of disciplining the dominant shareholder who is in control of the management and most of the times serve on the board as well. Using a sample of largest 500 firms between 2010-2012 that are listed on Bombay Stock Exchange we find that firms which are older, larger and pay dividend are more likely to undertake the CSR activities. We also find significant positive relationship between CSR and proportion of controlling shareholders which implies that founding families or government are driven by strategic decision of investing into CSR related activities. This is also in line with the positive relationship between insiders’ control over board and CSR. In contrast, fraction of independent directors does not affect the CSR even though our univariate analysis suggests that firms with higher proportion of independent directors spend more on CSR activities. To our surprise, profitability does not have any significant relationship with CSR activities. This questions the recent mandate of diverting 2% of the profit towards CSR activities in the Companies Act 2013. It is worth noting that some of the puzzling results presented in this section could be due to the unobservable nature of our attributes such as corporate governance along with the inaccurate measurement of the proxies to capture these attributes. We attempt to address some of these challenges in the following chapter by developing a structural equation model. 


Corporate Social Responsibility Corporate Governance Institutional Investor Business Group Institutional Ownership 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Adams M, Hardwick P (1998) An analysis of corporate donations: United Kingdom evidence. J Manage Stud 35(5):641–654CrossRefGoogle Scholar
  2. Ahmed N (2009) ASSOCHAM eco pulse study: corporate social responsibility 2008-09. ASSOCHAM Research BureauGoogle Scholar
  3. Akhtaruddin M, Hossain MA, Hossain M, Yao L (2009) Corporate governance and voluntary disclosure in corporate annual reports of malaysian listed firms. J Appl Manag Account Res 7(1):1–20Google Scholar
  4. Allen F, Carletti E, Marquez R (2007) Stakeholder capitalism, corporate governance and firm value, Working Paper, University of PennsylvaniaGoogle Scholar
  5. Allen F, Gale D (2001) Comparing financial systems. Cambridge, Massachusetts: The MIT PressGoogle Scholar
  6. Anees M (2012) Corporate social responsibility in India based on NSE NIFTY Companies. Int J Market Financ Serv Manage Res 1(12):70–79Google Scholar
  7. Aras G, Aybars A, Kutlu O (2010) Managing corporate performance Investigating the relationship between corporate social responsibility and financial performance in emerging markets, Int J Prod Perf Manag 59(3):229–254Google Scholar
  8. Balasubramanian NK, Kimber D, Siemensma F (2005) Emerging opportunities or traditions reinforced. J Corp Citizenship 2005(17):79–92CrossRefGoogle Scholar
  9. Ball R, Foster G (1982) Corporate financial reporting: a methodological review of empirical research, Studies on current research methodologies in accounting: a critical evaluation, supplement to vol. 20 of journal of accounting research, pp 161–234Google Scholar
  10. Barako DG, Brown AM (2008) Corporate social reporting and board representation: evidence from the Kenyan banking sector. J Manage Gov 12(4):309–324CrossRefGoogle Scholar
  11. Barako DG, Hancock P, Izan HY (2006) Factors Influencing voluntary corporate disclosure by Kenyan companies. Corp Governance: An Int Rev 14(2):107–25Google Scholar
  12. Barnea A, Rubin A (2010) Corporate social responsibility as a conflict between shareholders. J Bus Ethics 97(1):71–86CrossRefGoogle Scholar
  13. Bhagat S, Black B (2001) The non-correlation between board independence and long term firm performance. J Corp Law 27:231–274Google Scholar
  14. Bihari SC, Pradhan S (2011) CSR and performance: the story of banks in India. J Trans Manage 16(1):20–35Google Scholar
  15. Bradbury ME (1990) The incentives for voluntary audit committee formation. J Account Public Policy 9(1):19–36CrossRefGoogle Scholar
  16. Brammer S, Millington A (2006) Firm size, organizational visibility and corporate philanthropy: An empirical analysis. Bus Ethics: Euro Rev 15(1):6–18Google Scholar
  17. Chen CJ, Jaggi B (2000) Association between independent non-executive directors, family control and financial disclosures in Hong Kong. J Account Public Policy 19(4):285–310CrossRefGoogle Scholar
  18. Cheng EC, Courtenay SM (2006) Board composition, regulatory regime and voluntary disclosure. Int J Accoun 41(3):262–289CrossRefGoogle Scholar
  19. Cheng CM, Jaggi BL (2000) The association between independent non executive directors, family control and financial disclosures, J Account Public Policy 19(4/5):285–310Google Scholar
  20. Chung KH, Jo H (1996) The impact of security analysts’ monitoring and marketing functions on the market value of firms. J Financ Quant Anal 31(04):493–512CrossRefGoogle Scholar
  21. Coles JL, Daniel ND, Naveen L (2008) Boards: does one size fit all? J Financ Econ 87(2):329–356CrossRefGoogle Scholar
  22. Cormier D, Magnan M, Velthoven B (2005) Environmental disclosure quality in large german companies: economic incentives, public pressures or institutional conditions? Euro acc rev 4(1)Google Scholar
  23. Cowen S, Ferreri F, Parker LD (1987) The impact of corporate characteristics on social responsibility disclosure: a topology and frequency based analysis. Account Organ Soc 12(2):111–122Google Scholar
  24. De Andrés P, Azofra V, Lopez F (2005) Corporate boards in OECD countries: size, composition, functioning and effectiveness. Corp Gov Int Rev 13(2):197–210CrossRefGoogle Scholar
  25. De Luca G, Perotti V (2011) Estimation of ordered response models with sample selection. Stata J Stata Corp LP 11(2):213–239Google Scholar
  26. Dierkes M, Preston LE (1977) Corporate social accounting and reporting for the physical environment: a critical review and implementation proposal. Account Organ Soc 2(1):3–22Google Scholar
  27. Demsetz H, Lehn K (1985) The structure of corporate ownership: causes and consequences. J Polit Econ 1155–1177Google Scholar
  28. von Eije H, Megginson W (2008) Dividends and share repurchases in the european union. J Financ Econ 89:347–374Google Scholar
  29. Eisenberg T, Sundgren S, Wells MT (1998) Larger board size and decreasing firm value in small firms. J Financ Econ 48(1):35–54CrossRefGoogle Scholar
  30. Eng LL, Mak YT (2003) Corporate governance and voluntary disclosure. J Account Pub Pol 22(4):325–345Google Scholar
  31. Fama EF, French KR (2001) Disappearing dividends: changing firm characteristics or lower propensity to pay? J Financ Econ 60:3–44Google Scholar
  32. Friedman M (1970) The social responsibility of business is to increase profits. NY Times Mag 32–33, 122–126, 13 SeptGoogle Scholar
  33. Gallego I (2006) The use of economic, social and environmental indicators as a measure of sustainable development in spain. Corp Soc Resp Env Manag 13(2):78–97Google Scholar
  34. García Sánchez IM, Rodríguez Domínguez L, Gallego Álvarez I (2011) Corporate governance and strategic information on the internet: a study of Spanish listed companies. Account Auditing Account J 24(4):471–501CrossRefGoogle Scholar
  35. Gompers P, Ishii J, Metrick A (2003) Corporate governance and equity prices. Quart J Econ 118:107–155CrossRefGoogle Scholar
  36. Goss A, Roberts GS (2011) The impact of corporate social responsibility on the cost of bank loans. J Bank Financ 35(7):1794–1810Google Scholar
  37. Gul FA, Leung S (2004) Board leadership, outside directors’ expertise and voluntary disclosures, J Account Public Policy 23(5):351–379Google Scholar
  38. Hackston D, Milne MJ (1996) Some determinants of social and environmental isclosures in New Zealand companies. Account Audit Accoun J 9(1):77–108Google Scholar
  39. Haley UCV (1991) Corporate contributions as managerial masques: reframing corporate contributions as strategies to influence society. J Manag Stud 28:485–509Google Scholar
  40. Haniffa RM, Cooke TE (2005) The impact of culture and governance on corporate social reporting. J Account Public Policy 24(5):391–430CrossRefGoogle Scholar
  41. Harford J, Mansi SA, Maxwell WF (2008) Corporate governance and firm cash holdings in the US. J Financ Econ 87:535–555CrossRefGoogle Scholar
  42. Heckman JJ (1978) Dummy endogenous variables in a simultaneous equation system. Econometrica, 46(4):931–959Google Scholar
  43. Heckman J (1979) Sample selection bias as a specification error. Econometrica 47:153–161CrossRefGoogle Scholar
  44. Hermalin BE, Weisbach MS (1991). The effects of board composition and direct incentives on firm performance. Financ Manage 101–112Google Scholar
  45. Ho SSM, Wong KS (2001) A study of corporate disclosure practices and effectiveness in Hong Kong. J Int Financ Manag Account 12(1):75–101Google Scholar
  46. Hossain M, Reaz M (2007) The determinants and characteristics of voluntary disclosure by Indian banking companies. Corp Soc Resp Env manag 14(5):274–288Google Scholar
  47. Huafang X, Jianguo Y (2007) Ownership structure, board composition and corporate voluntary disclosure: Evidence from listed companies in China. Manag Audit J 22(6):604–619Google Scholar
  48. Ibrahim NA, Angelidis JP (1995) The corporate social responsiveness orientation of board members: are there differences between inside and outside directors? J Bus Ethics 14(5):405–410Google Scholar
  49. Jensen MC (1986) Agency cost of free cash flow, corporate finance, and takeovers. Corporate Finance, and Takeovers. Am Econ Rev 76(2)Google Scholar
  50. Jensen MC (1993) The modern industrial revolution, exit, and the failure of internal control systems. the. J Finance 48(3):831–880CrossRefGoogle Scholar
  51. Jensen MC (2001) Value maximization, stakeholder theory, and the corporate objective function. J Appl Corp Finance 14(3):8–21CrossRefGoogle Scholar
  52. Jensen M, Meckling W (1976) Theory of the firm: managerial behavior, agency costs, and ownership structure. J Financ Econ 3:305–360Google Scholar
  53. Jiraporn P, Chintrakarn P (2013) Corporate social responsibility (CSR) and CEO luck: are lucky CEOs socially responsible? Appl Econ Lett Taylor & Francis J 20(11):1036–1039Google Scholar
  54. Jo H, Kim Y (2008) Ethics and disclosure: a study of the financial performance of firms in the seasoned equity offerings market. J Bus Ethics 80(4):855–878CrossRefGoogle Scholar
  55. Jose PD, Saraf S (2013) Corporate sustainability initiatives reporting: a study of India’s most valuable companies. IIM Bangalore Research Paper, vol 428Google Scholar
  56. Karamanou I, Vafeas N (2005) The association between corporate boards, audit committees, and management earnings forecasts: an empirical analysis. J Account Res 43(3):453–486CrossRefGoogle Scholar
  57. Kansal M, Joshi M, Batra GS (2014) Advances in accounting, incorporating advances in international accounting 30:217–229Google Scholar
  58. Khan AF, Atkinson A (1987) Managerial attitudes to social responsibility: a comparative study in India and Britain. J Bus Ethics 6(6):419–432CrossRefGoogle Scholar
  59. Knyazeva D (2007) Corporate governance, analyst following, and firm behavior. Working Paper, SSRN.comGoogle Scholar
  60. Lenway SA, Rehbein KA (1991) Leaders, followers, and free riders: An empirical test of the variation of corporate political involvement. Acad Manag J 34(4):1073–1090Google Scholar
  61. Li H, Meng L, Wang Q, Zhou LA (2008) Political connections, financing and firm performance: evidence from chinese private firms. J Development Econ 87(2):283–299Google Scholar
  62. Lim S, Matolcsy Z, Chow D (2007) The association between board composition and different types of voluntary disclosure. Eur Account Rev 16(3):555–583CrossRefGoogle Scholar
  63. Lima Crisóstomo V, de Souza Freire F, Cortes de Vasconcellos F (2011) Corporate social responsibility, firm value and financial performance in Brazil, Soc Responsib J 7(2):295–309Google Scholar
  64. McGuire JB, Sundgren A, Schneeweis T (1988) Corporate social responsibility and firm financial performance. Acad Manag J 31:854–872CrossRefGoogle Scholar
  65. Meznar MB, Nigh D, Kwok CCY (1994) Effect of announcements of withdrawal from South Africa on stockholder wealth. Acad Manag Rev 37(6):1633–1648Google Scholar
  66. Mishra S, Suar D (2010) Does corporate social responsibility influence firm performance of Indian companies? J Bus Ethics 95(4):571–601CrossRefGoogle Scholar
  67. Nash DR (2012) CSR: Contributions of “Maharatna” Companies of India. Asian J Res Bus Econ Manage 2(4):105–112Google Scholar
  68. Navarro P (1988) Why do corporations give to charity? J Bus 61:65–93CrossRefGoogle Scholar
  69. Oana B (2010) Tata: leadership with trust, richard ivey school of business case collection. LondonGoogle Scholar
  70. O’Neill HM, Saunders CB, McCarthy AD (1989) Board members, corporate social responsiveness and profitability: are tradeoffs necessary? J Bus Ethics 8(5):353–357CrossRefGoogle Scholar
  71. Pant M, Pattanayak M (2007) Insider ownership and firm value: Evidence from Indian corporate sector. Economic and Political Weekly. Accessed 21 April 2007Google Scholar
  72. Pagano M, Volpin PF (2005) The political economy of corporate governance. Am Econ Rev 1005–1030Google Scholar
  73. Patelli L, Prencipe A (2007) The relationship between voluntary disclosure and independent directors in the presence of a dominant shareholder. Euro Account Rev 16(1):5–33Google Scholar
  74. Patten DM (1991) Exposure, legitimacy, and social disclosure. J Account Public Policy 10(4):297–308Google Scholar
  75. Prado-Lorenzo JM, Gallego-Alvarez I, Garcia-Sanchez IM (2009) Stakeholder engagement and corporate social responsibility reporting: the ownership structure effect. Corp Soc Responsib Environ Manage 16(2):94–107CrossRefGoogle Scholar
  76. Ramendra S, Agarwal S (2013) Does CSR orientation reflect stakeholder relationship marketing orientation? an empirical examination of indian banks. Market Intell Plann 31(4):405–420Google Scholar
  77. Roberts RW (1992) Determinants of corporate social responsibility disclosure: an application of stakeholder theory. Account Organ Soc 17(6):595–612Google Scholar
  78. Rodriguez-Dominguez L, Gallego-Alvarez I, Garcia-Sanchez IM (2009) Corporate governance and codes of ethics. J Bus Ethics 90(2):187–202CrossRefGoogle Scholar
  79. Sarkar J, Sarkar S (2008) Debt and corporate governance in emerging economies Evidence from India1. Econ Transit 16(2):293–334CrossRefGoogle Scholar
  80. Scherer AG, Palazzo G, Baumann D (2006) Global rules and private actors: toward a new role of the transnational corporation in global governance. Bus Ethics Quart 16(4):505–532Google Scholar
  81. Selarka E (2005) Ownership concentration and firm value: a study from the indian corporate sector. Emerg Mark Financ Tr 41(6):83–108Google Scholar
  82. Sharma N (2011) CSR practices and CSR reporting in Indian banking sector. Int J Adv Econ Bus Manage 1(2):58–66Google Scholar
  83. Sharma E, Mani M (2013). Corporate social responsibility: an analysis of Indian commercial banks. AIMA J Manage Res 7(1/4):0974–497Google Scholar
  84. Shleifer A, Vishny RW (1986). Large shareholders and corporate control. J Polit Econ 461–488Google Scholar
  85. Siegfried JJ, McElroy KM, Biernot-Fawkes D (1983) The management of corporate contributions. Res Corp Perform Policy 5:87–102Google Scholar
  86. Siregar S, Bachtiar Y (2010) Corporate social reporting: empirical evidence from Indonesia Stock Exchange. Int J Islam Middle E Finance Manag 3(3):241–252Google Scholar
  87. Surroca J, Tribó JA (2008) Managerial entrenchment and corporate social performance. J Bus Finance Account 35(5–6):748–789CrossRefGoogle Scholar
  88. Tirole J (2001) Corporate governance. Econometrica 69:1–38CrossRefGoogle Scholar
  89. Ullmann A (1985) Data in search of a theory: a critical examination of therelationships among social performance, social disclosure and economic performance of US firms. Acad Manag Rev 10(3):540–557Google Scholar
  90. Waddock SA, Gravess SB (1997) Finding the link between stakeholder relations and quality of management. J invest 6(4):20–24Google Scholar
  91. Weisbach MS (1988) Outside directors and CEO turnover. J Financ Econ 20:431–460CrossRefGoogle Scholar
  92. Willekens M, Bauwhede HV, Gaeremynck A, Van De Gucht L (2005) Internal and external governance and the voluntary disclosure of financial and non financial performance. In: 15th national BAA auditing SIG conference, pp 1–31Google Scholar
  93. Yermack D (1996) Higher market valuation of companies with a small board of directors. J Financ Econ 40(2):185–211CrossRefGoogle Scholar
  94. Yu FF (2008) Analyst coverage and earnings management. J Financ Econ 88(2):245–271CrossRefGoogle Scholar
  95. Zahra SA, Stanton WW (1988) The implications of board of directors’ composition for corporate strategy and performance. Int J Manage 5(2):229–236Google Scholar

Copyright information

© Springer Science+Business Media Singapore 2016

Authors and Affiliations

  1. 1.Madras School of EconomicsChennaiIndia

Personalised recommendations