Abstract
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.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Adams M, Hardwick P (1998) An analysis of corporate donations: United Kingdom evidence. J Manage Stud 35(5):641–654
Ahmed N (2009) ASSOCHAM eco pulse study: corporate social responsibility 2008-09. ASSOCHAM Research Bureau
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):1–20
Allen F, Carletti E, Marquez R (2007) Stakeholder capitalism, corporate governance and firm value, Working Paper, University of Pennsylvania
Allen F, Gale D (2001) Comparing financial systems. Cambridge, Massachusetts: The MIT Press
Anees M (2012) Corporate social responsibility in India based on NSE NIFTY Companies. Int J Market Financ Serv Manage Res 1(12):70–79
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):229–254
Balasubramanian NK, Kimber D, Siemensma F (2005) Emerging opportunities or traditions reinforced. J Corp Citizenship 2005(17):79–92
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 161–234
Barako DG, Brown AM (2008) Corporate social reporting and board representation: evidence from the Kenyan banking sector. J Manage Gov 12(4):309–324
Barako DG, Hancock P, Izan HY (2006) Factors Influencing voluntary corporate disclosure by Kenyan companies. Corp Governance: An Int Rev 14(2):107–25
Barnea A, Rubin A (2010) Corporate social responsibility as a conflict between shareholders. J Bus Ethics 97(1):71–86
Bhagat S, Black B (2001) The non-correlation between board independence and long term firm performance. J Corp Law 27:231–274
Bihari SC, Pradhan S (2011) CSR and performance: the story of banks in India. J Trans Manage 16(1):20–35
Bradbury ME (1990) The incentives for voluntary audit committee formation. J Account Public Policy 9(1):19–36
Brammer S, Millington A (2006) Firm size, organizational visibility and corporate philanthropy: An empirical analysis. Bus Ethics: Euro Rev 15(1):6–18
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):285–310
Cheng EC, Courtenay SM (2006) Board composition, regulatory regime and voluntary disclosure. Int J Accoun 41(3):262–289
Cheng CM, Jaggi BL (2000) The association between independent non executive directors, family control and financial disclosures, J Account Public Policy 19(4/5):285–310
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):493–512
Coles JL, Daniel ND, Naveen L (2008) Boards: does one size fit all? J Financ Econ 87(2):329–356
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)
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):111–122
De Andrés P, Azofra V, Lopez F (2005) Corporate boards in OECD countries: size, composition, functioning and effectiveness. Corp Gov Int Rev 13(2):197–210
De Luca G, Perotti V (2011) Estimation of ordered response models with sample selection. Stata J Stata Corp LP 11(2):213–239
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):3–22
Demsetz H, Lehn K (1985) The structure of corporate ownership: causes and consequences. J Polit Econ 1155–1177
von Eije H, Megginson W (2008) Dividends and share repurchases in the european union. J Financ Econ 89:347–374
Eisenberg T, Sundgren S, Wells MT (1998) Larger board size and decreasing firm value in small firms. J Financ Econ 48(1):35–54
Eng LL, Mak YT (2003) Corporate governance and voluntary disclosure. J Account Pub Pol 22(4):325–345
Fama EF, French KR (2001) Disappearing dividends: changing firm characteristics or lower propensity to pay? J Financ Econ 60:3–44
Friedman M (1970) The social responsibility of business is to increase profits. NY Times Mag 32–33, 122–126, 13 Sept
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):78–97
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):471–501
Gompers P, Ishii J, Metrick A (2003) Corporate governance and equity prices. Quart J Econ 118:107–155
Goss A, Roberts GS (2011) The impact of corporate social responsibility on the cost of bank loans. J Bank Financ 35(7):1794–1810
Gul FA, Leung S (2004) Board leadership, outside directors’ expertise and voluntary disclosures, J Account Public Policy 23(5):351–379
Hackston D, Milne MJ (1996) Some determinants of social and environmental isclosures in New Zealand companies. Account Audit Accoun J 9(1):77–108
Haley UCV (1991) Corporate contributions as managerial masques: reframing corporate contributions as strategies to influence society. J Manag Stud 28:485–509
Haniffa RM, Cooke TE (2005) The impact of culture and governance on corporate social reporting. J Account Public Policy 24(5):391–430
Harford J, Mansi SA, Maxwell WF (2008) Corporate governance and firm cash holdings in the US. J Financ Econ 87:535–555
Heckman JJ (1978) Dummy endogenous variables in a simultaneous equation system. Econometrica, 46(4):931–959
Heckman J (1979) Sample selection bias as a specification error. Econometrica 47:153–161
Hermalin BE, Weisbach MS (1991). The effects of board composition and direct incentives on firm performance. Financ Manage 101–112
Ho SSM, Wong KS (2001) A study of corporate disclosure practices and effectiveness in Hong Kong. J Int Financ Manag Account 12(1):75–101
Hossain M, Reaz M (2007) The determinants and characteristics of voluntary disclosure by Indian banking companies. Corp Soc Resp Env manag 14(5):274–288
Huafang X, Jianguo Y (2007) Ownership structure, board composition and corporate voluntary disclosure: Evidence from listed companies in China. Manag Audit J 22(6):604–619
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):405–410
Jensen MC (1986) Agency cost of free cash flow, corporate finance, and takeovers. Corporate Finance, and Takeovers. Am Econ Rev 76(2)
Jensen MC (1993) The modern industrial revolution, exit, and the failure of internal control systems. the. J Finance 48(3):831–880
Jensen MC (2001) Value maximization, stakeholder theory, and the corporate objective function. J Appl Corp Finance 14(3):8–21
Jensen M, Meckling W (1976) Theory of the firm: managerial behavior, agency costs, and ownership structure. J Financ Econ 3:305–360
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):1036–1039
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):855–878
Jose PD, Saraf S (2013) Corporate sustainability initiatives reporting: a study of India’s most valuable companies. IIM Bangalore Research Paper, vol 428
Karamanou I, Vafeas N (2005) The association between corporate boards, audit committees, and management earnings forecasts: an empirical analysis. J Account Res 43(3):453–486
Kansal M, Joshi M, Batra GS (2014) Advances in accounting, incorporating advances in international accounting 30:217–229
Khan AF, Atkinson A (1987) Managerial attitudes to social responsibility: a comparative study in India and Britain. J Bus Ethics 6(6):419–432
Knyazeva D (2007) Corporate governance, analyst following, and firm behavior. Working Paper, SSRN.com
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):1073–1090
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):283–299
Lim S, Matolcsy Z, Chow D (2007) The association between board composition and different types of voluntary disclosure. Eur Account Rev 16(3):555–583
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):295–309
McGuire JB, Sundgren A, Schneeweis T (1988) Corporate social responsibility and firm financial performance. Acad Manag J 31:854–872
Meznar MB, Nigh D, Kwok CCY (1994) Effect of announcements of withdrawal from South Africa on stockholder wealth. Acad Manag Rev 37(6):1633–1648
Mishra S, Suar D (2010) Does corporate social responsibility influence firm performance of Indian companies? J Bus Ethics 95(4):571–601
Nash DR (2012) CSR: Contributions of “Maharatna” Companies of India. Asian J Res Bus Econ Manage 2(4):105–112
Navarro P (1988) Why do corporations give to charity? J Bus 61:65–93
Oana B (2010) Tata: leadership with trust, richard ivey school of business case collection. London
O’Neill HM, Saunders CB, McCarthy AD (1989) Board members, corporate social responsiveness and profitability: are tradeoffs necessary? J Bus Ethics 8(5):353–357
Pant M, Pattanayak M (2007) Insider ownership and firm value: Evidence from Indian corporate sector. Economic and Political Weekly. Accessed 21 April 2007
Pagano M, Volpin PF (2005) The political economy of corporate governance. Am Econ Rev 1005–1030
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):5–33
Patten DM (1991) Exposure, legitimacy, and social disclosure. J Account Public Policy 10(4):297–308
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):94–107
Ramendra S, Agarwal S (2013) Does CSR orientation reflect stakeholder relationship marketing orientation? an empirical examination of indian banks. Market Intell Plann 31(4):405–420
Roberts RW (1992) Determinants of corporate social responsibility disclosure: an application of stakeholder theory. Account Organ Soc 17(6):595–612
Rodriguez-Dominguez L, Gallego-Alvarez I, Garcia-Sanchez IM (2009) Corporate governance and codes of ethics. J Bus Ethics 90(2):187–202
Sarkar J, Sarkar S (2008) Debt and corporate governance in emerging economies Evidence from India1. Econ Transit 16(2):293–334
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):505–532
Selarka E (2005) Ownership concentration and firm value: a study from the indian corporate sector. Emerg Mark Financ Tr 41(6):83–108
Sharma N (2011) CSR practices and CSR reporting in Indian banking sector. Int J Adv Econ Bus Manage 1(2):58–66
Sharma E, Mani M (2013). Corporate social responsibility: an analysis of Indian commercial banks. AIMA J Manage Res 7(1/4):0974–497
Shleifer A, Vishny RW (1986). Large shareholders and corporate control. J Polit Econ 461–488
Siegfried JJ, McElroy KM, Biernot-Fawkes D (1983) The management of corporate contributions. Res Corp Perform Policy 5:87–102
Siregar S, Bachtiar Y (2010) Corporate social reporting: empirical evidence from Indonesia Stock Exchange. Int J Islam Middle E Finance Manag 3(3):241–252
Surroca J, Tribó JA (2008) Managerial entrenchment and corporate social performance. J Bus Finance Account 35(5–6):748–789
Tirole J (2001) Corporate governance. Econometrica 69:1–38
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):540–557
Waddock SA, Gravess SB (1997) Finding the link between stakeholder relations and quality of management. J invest 6(4):20–24
Weisbach MS (1988) Outside directors and CEO turnover. J Financ Econ 20:431–460
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 1–31
Yermack D (1996) Higher market valuation of companies with a small board of directors. J Financ Econ 40(2):185–211
Yu FF (2008) Analyst coverage and earnings management. J Financ Econ 88(2):245–271
Zahra SA, Stanton WW (1988) The implications of board of directors’ composition for corporate strategy and performance. Int J Manage 5(2):229–236
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2016 Springer Science+Business Media Singapore
About this chapter
Cite this chapter
Bhaduri, S.N., Selarka, E. (2016). Impact of Corporate Governance on Corporate Social Responsibility in India—Empirical Analysis. In: Corporate Governance and Corporate Social Responsibility of Indian Companies. CSR, Sustainability, Ethics & Governance. Springer, Singapore. https://doi.org/10.1007/978-981-10-0925-9_7
Download citation
DOI: https://doi.org/10.1007/978-981-10-0925-9_7
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-10-0924-2
Online ISBN: 978-981-10-0925-9
eBook Packages: Business and ManagementBusiness and Management (R0)