Does corporate social responsibility disclosure impact firm performance? An industry-wise analysis of Indian firms

Despite a large number of studies examining the relationship between corporate social responsibility disclosure (CSRD) and corporate financial performance (CFP), the literature remains inconclusive. Moreover, most of the studies are conducted in the context of American and European firms and remain scarce in the context of developing economies. To bridge this significant gap, this study attempts to investigate the strength of the relationship between CSRD and CFP of Indian firms. The study uses ESG (environmental, social and governance) score as a proxy for CSRD and investigates its relationship with both market-based and accounting-based financial performance measures for Indian companies. Both aggregate and disaggregate analyses based on industry type are carried out. The study includes a sample of 287 companies from the financial year 2014-2015 to 2018-2019 and employs panel data regression using pooled ordinary least squares (OLS), fixed effect and random effect model. The findings indicate that CSR disclosure has varying effects on CFP metrics. For industries-consumer goods, consumer services and heavy engineering, CSRD is positively associated with CFP, while for healthcare and energy and utility firms, the relationship between CSRD and CFP is negative. Overall, the type of industry, as well as the type of financial performance indicator, shows varying CSRD-CFP dynamics. The relevance of this study lies in the increasing importance of social responsibility and the growing contribution of emerging markets in international business. The study offers implications to assist policymakers, regulators and corporate managers in better understanding the CSRD-CFP structures in the context of a developing economy.