Do third-party assurance and mandatory CSR reporting matter to philanthropic and financial performance nexus? Evidence from India

Abstract

Purpose

The purpose of this study is to focus on examining whether third-party assurance (TPA) and mandatory corporate social responsibility reporting (MCSR) matter in the association between philanthropic giving (PHG) and listed firms’ financial performance.

Design/methodology/approach

Using the Indian stock market as a testing ground, the study used interactive regression and panel regression to analyse 80 sustainability-reporting firms with 800 firm-year observations between 2010 and 2019.

Findings

The first findings show a positive association between PHG and financial performance (return on assets, ROA and stock price returns, SPR). Also, the study shows that the interactive variable of MCSR and PHG has a mixed association with financial performance. The second findings show a positive and statistically significant association between TPA and SPR. Also, the interactive effect of TPA and PHG has a negative association with return on equity (ROE) and a positive association with SPR. The third findings show a negative association between MCSR and financial performance (ROA and ROE) and a positive association with SPR. However, when a firm combines MCSR and TPA, the outcome is a negative association with ROE. The fourth findings show that MCSR has a positive association with TPA. The study control for any form of heteroscedasticity, serial correlation and endogeneity effects.

Practical implications

Managers, if given a choice, must opt for TPA over MCSR because the βcoefficient is higher in TPA than MCSR in PHG-financial performance nexus.

Originality/value

The study addresses the information asymmetry problem from the application of TPA and MCSR, which is new to an emerging economy context.

Citation

Oware, K.M., Valacherry, A.K. and Mallikarjunappa, T. (2022), "Do third-party assurance and mandatory CSR reporting matter to philanthropic and financial performance nexus? Evidence from India", Social Responsibility Journal, Vol. 18 No. 5, pp. 897-917. https://doi.org/10.1108/SRJ-10-2020-0411