Analyzing the impact of corporate social responsibility on corporate financial performance: evidence from top Indian firms

Purpose Despite continuous research efforts, the literature is still inconclusive about the relationship between corporate social responsibility (CSR) and financial performance. With an aim to address this problem, this study aims to analyze the impact of CSR on financial performance in the Indian context. Design/methodology/approach Using a panel of top 137 companies from CNX-500 for 10 years (2008-2017), the impact of CSR on three indicators of financial performance, namely, Return on Assets (ROA), Return on Equity (ROE) and Net Profit Margin (NPM), is evaluated using the panel data regression analysis. The technique of content analysis is used to collect data on CSR from the annual reports of selected companies. Findings The study finds that the impact of CSR on financial performance may be neutral (with ROA and NPM) or negative (with ROE). The negative influence of CSR on ROE of firms supports the theory by Friedman (1970) that the only responsibility of business is to maximize profits and returns for its shareholders. Originality/value After amendments in Companies Act, 2013, there is limited literature addressing this scientific inquiry in the Indian context. The study period (2008-2017) includes CSR disclosures from both periods, before reforms and after reforms, which adds to the uniqueness of this research study. In addition, this study uses a research instrument consisting of a total of 178 CSR activities divided across 46 themes for collecting data from annual reports of the companies. The utilization of such a comprehensive research instrument, for the study, also adds to its peculiarity.