Impact of Corporate Social Responsibility on Financial Performance: A Comprehensive Analysis of Indian Firms

Abstract

This research paper presents a comprehensive analysis of the impact of corporate social responsibility (CSR) on the financial performance of Indian firms. The study examines the integration of social and environmental concerns in firms' business operations. It explores the effectiveness of the New Companies Act 2013 amendment regarding CSR. The primary objective is to determine the level of CSR disclosure and investigate the association between CSR and financial performance (FP) among India's top 15 CSR spending firms. The study utilizes data collected from annual reports of listed companies in the National Stock Exchange (NSE), Annual CSR reports, and the website www.CSRbox.in. Secondary data analysis uses SPSS, employing linear regression and correlation analysis techniques. The findings reveal a significant and very low positive relationship between CSR and key financial indicators, including return on assets (ROA), return on equity (ROE), and profit before tax (PBT), when controlling for firm size. Therefore, it can be concluded that there exists a significant low positive relationship between CSR and financial performance. The implications of this study are relevant for academicians and the corporate world, providing insights into the relationship between CSR and financial performance in developing countries like India. Furthermore, the study highlights that CSR represents the efforts of companies in India to address societal issues, going beyond mere legal compliance. The data is used to analyse solvency and profitability indicators such as PBT, ROI, ROE, ROA, and liquid ratio.