This study aims to explore the relationship between corporate social responsibility (CSR) and the cost of equity (CoE) capital of Indian manufacturing firms.
The study is conducted on a sample of 68 manufacturing firms listed on National Stock Exchange of India Limited (NSE) 200, investigated for the period 2013 to 2018. To deal with the issue of endogeneity, the techniques of system generalized method of moments and two-stage least square have been applied.
The results suggest that CSR disclosure is positively linked with the CoE in the case of manufacturing firms, signalling that socially responsible firms in India bear a higher CoE. The findings indicate that investors do not treat CSR as a value-augmenting factor.
Firms should effectuate effective managerial and organizational changes to fulfil their social responsibility instead of window dressing their activities. Regulators in India must work towards more stringent enforcement of the act and make efforts to promote public awareness of CSR.
The integration of CSR activities with the economic operations of the business is imperative.
To the best of researchers’ knowledge, there is a lack of studies focussing on India, which serves as an ideal setting for the study owing to the latest legislation mandating CSR expenditure. The study focusses on manufacturing firms as these firms are more susceptible to contribute to environmental pollution, exploitation of natural resources and labour concerns.
The authors would like to extend their gratitude towards the reviewers and the editor for their valuable suggestions. Monika Dahiya would also like to acknowledge the financial support (Junior Research Fellowship) of the University Grants Commission, India.
Dahiya, M. and Singh, S. (2020), "The linkage between CSR and cost of equity: an Indian perspective", Sustainability Accounting, Management and Policy Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SAMPJ-10-2019-0379Download as .RIS
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