Speaker: Swarnodeep Homroy, University of Gronigen
We study how corporate governance affects corporate social responsibility (CSR) using the 2013 CSR regulation in India that mandates qualifying firms to spend 2 percent of the pre-tax profits on CSR. Using an instrumental variable regression, we demonstrate that the formation of CSR committees and appointment of directors with relevant expertise (CSR-Directors) increases the compliance to the CSR law by 12 percent. We show that CSR-Directors affect compliance by reducing the cost of compliance. This effect is larger for companies in more competitive industries, companies with higher debt, and companies with no previous history of CSR. Companies with higher CSR compliance gains in value and has better creditworthiness.