Archive · 4 Jan 2026
Mandatory CSR Spending May Lower Investor Confidence: IIM Study
A study by IIM Lucknow found that mandatory CSR spending by Indian companies can make investors worry.
This is because they see the spending as a cost they have to pay, not as a good investment.
The study looked at data from 484 companies over seven years.
It found that this kind of spending can make it more expensive for companies to get money from investors.
However, service companies might benefit from CSR spending because they rely more on their reputation.
The study suggests that companies should make CSR a part of their main goals to build trust and lower costs.
Mandatory CSR spending can reduce investor confidence and increase the cost of equity for Indian companies.
The study analyzed data from 484 Indian companies from 2014 to 2020.
The Ohlson and Juettner-Nauroth (OJ) model was used to assess the impact of CSR spending.
Service sector firms showed a contrasting trend where CSR spending lowered their cost of equity.
Authentic CSR initiatives aligned with core business values can enhance investor trust and lower the cost of raising equity.
- Who
- Indian Institute of Management, Lucknow
- What
- Study on the impact of mandatory CSR spending on investor confidence and cost of equity
- When
- Data analyzed from 2014 to 2020
- Where
- India
- Why
- To understand the financial implications of mandatory CSR spending on Indian companies
- Study Conducted By
- Indian Institute of Management, Lucknow
- Journal Published In
- Journal of Accounting in Emerging Economies
- Time Period Analyzed
- 2014 to 2020
- Number of Companies Analyzed
- 484
- Model Used
- Ohlson and Juettner-Nauroth (OJ) model
- Key Finding
- Positive correlation between CSR expenditure and implied cost of equity (CoE)
- Exceptional Sector
- Service sector firms show a contrasting trend