Corporate Social Responsibility and Company Performance

Companies have realized the potential benefits of being involved in various CSR activities. They are often aware of and concern about the influence of their operational activities on the environment, community, employee and other coercive stakeholder groups. In order to create social responsible image, companies make CSR disclosures, and companies increase CSR disclosure following mandatory reporting requirement.

Firstly, in order to achieve legitimacy, the company can use the regulation to get advantage and claim compliance by satisfying the minimum disclosure requirement imposed by such enactment of mandatory requirement. Therefore CSR disclosures are used as an instrument to legitimise their existence. They probably disclose information of their CSR activities and initiatives not only because of the basic reasons of their existence but also to ensure minimum compliance with the new guidelines issued by the act for legitimising themselves. Companies are adhering to CSR principles such as transparency, accountability and sustainability.

Second, these companies are constantly under pressure to contribute to society because of the demands of various stakeholder groups such as local community, the government, environment, industry associations, non-governmental organisations (NGOs) etc.

Finally, the extant review of literature found the mixed results, as some of the studies found positive relationship between CSR disclosure and companies' financial performance. While the results of other studies reveal negative relationship between CSR disclosure and companies financial performance. Some of the studies show the neutral relationship between CSR disclosure and companies financial performance. This book is based on a study that intends to examine the extent of disclosure of CSR practices amongst Indian companies. In this study, the relationship between CSR disclosure levels and financial performance is investigated. This is undertaken by using data collected from the annual reports of the firms listed on Indian stock exchange.

This study is found to be justified to the number of reasons. Firstly, most of the previous studies on CSR disclosure have focused on firms in developed countries. Research on CSR in developing countries is minimal with the exception of Bangladesh. Empirical evidence from India highlights that CSR activities and disclosures are largely voluntary as CSR has been found to be strongly driven by philanthropic initiatives undertaken by the large Indian corporations.

In particular, studies on CSR disclosure and its relationship with financial performance in India are still limited in numbers. The empirical results from this study may be different from those of other developing countries. This could be because of differences in CSR practices between India and other developing countries. Such differences may occur due to variation in socio-political issues, cultural issues, laws and regulations.

A number of studies have also focused on specific industries but with an involvement of using small sample size. These studies illustrate that limited sample size and the focus on specific industries in previous studies might have affected the consistency and generated different results. Also, most of the studies conducted before implementation of the Companies Act, 2013.

Based on the above research gaps in CSR studies in India, this book endeavours to investigate the relationship between CSR disclosures (based on qualitative as well as quantitative) and companies financial performance along with several dimensions.