Abstract
Over the past few decades, Corporate Social Responsibility (CSR) has garnered increasing attention in emerging economies, driven by the need to address significant societal challenges and foster sustainable development. The motivation for this thesis comes from the marked social contrasts evident in India, a country characterized by notable income inequality and poverty that has experienced a surge in the demand for corporate involvement in social causes with long-term societal benefits. Responding to these challenges, the Indian government has enforced mandatory CSR regulations, prompting Indian corporations to prioritize social endeavours. This thesis examines Social Disclosures (SOCDS) in India that investigate (i) the effectiveness of CSR mandates in promoting SOCDS, emphasizing the mediating role of CSR committees and investigating the moderating influence of Business Group (BG) affiliation on CSR committee quality and SOCDS (Chapter 2); (ii) the impact of SOCDS on audit reporting timeliness, with a focus on BG firms (Chapter 3); and, (iii) the association between SOCDS and firm risk, identifying the complexities within BG structures (Chapter 4).
These questions are particularly relevant to India, the first country to issue specific and general CSR regulatory guidelines for listed firms under section 135 of the Companies Act 2013 to establish an equitable society and achieve sustainable economic development. The prevalence of BG firms in the Indian business landscape presents another intriguing aspect of this research. BG firms, especially in emerging countries, have distinct characteristics that can influence their CSR engagement and firm outcomes. Despite a legal framework rooted in British common law emphasizing investor protection in India, challenges arise in the practical enforcement of shareholders’ rights due to corruption and inefficiencies within the judicial system, potentially leading to exploitation by company insiders. Therefore, the Indian regulatory framework and business environment make it a unique and compelling research setting for this study.
Chapter 2 investigates the relationship between mandated CSR and SOCDS in India. The study also explores whether CSR committees mediate this relationship and examine how BG affiliation moderates CSR committee quality and SOCDS. Using a dataset comprising 5,345 BSE listed firms over 10 years (2011–2020), Baron and Kenny’s (1986) three-step model is employed to examine the mediation effect of CSR committees. The findings indicate that CSR mandates positively influence SOCDS due to coercive pressures, with higher CSR committee quality leading to increased SOCDS. Moreover, SOCDS in India positively correlates with CSR committee quality and is particularly pronounced in BG firms. Supplementary analysis reveals that enhancing CSR committee quality improves firms’ likelihood of fulfilling CSR mandatory spending requirements and actual CSR expenditure in India. The contribution of this study comes in the revelation of the intricate dynamics of CSR mandates, CSR committees, and SOCDS in emerging economies, highlighting the mediation role of CSR committees and the moderating influence of BG firms on SOCDS transparency.
Chapter 3 considers the effect of SOCDS on the timeliness of reporting in India using 6,508 BSE firm-year observations from 2007 to 2021. Findings indicate that enhancing SOCDS reduces audit report lag, suggesting that audit efficiency improves by significantly improving social transparency. The relationship is more prominent in BG firms than in non-BG firms. Moreover, the moderating role of social disclosure within BG firms is greater for those operations with high promoter ownership that are managed by professional CEOs. Additionally, SOCDS has a stronger impact on audit reporting timeliness for firms audited by BIG 4 accounting firms. These results withstand endogeneity tests and alternative measures and contribute to understanding audit service production efficiency from the perspective of nonfinancial information disclosure.
Chapter 4 investigates the relationship between SOCDS and firm risk, focusing on the implications of BG firms within the institutional context of India. The sample consists of 6,543 BSE listed firm-year observations from 2008 to 2021. The findings reveal a negative association between SOCDS and firm risk, consistent with stakeholder theory, indicating that firms engaging in transparent social disclosure practices experience less risk. Conversely, BG firms moderate this relationship, with BG firms exhibiting less pronounced risk reduction through SOCDS. Further analysis indicates that the attenuation effect within BG firms is magnified in firms managed by affiliated CEOs. These findings highlight the complexities of governance dynamics within BG structures, emphasizing the need for nuanced approaches to social disclosure and risk management. The findings contribute to understanding corporate governance dynamics and stakeholder management in emerging economies, offering insights for policymakers, practitioners, and investors.