Impact of Paradigm Shift in Corporate Social Responsibility from Voluntary to Mandatory on Corporate Financial Performance

Abstract

This study aimed to find out the impact of a paradigm shift in corporate social responsibility on corporate financial performance. Developing an inclusive and prosperous society needs to reformulate the business-society nexus concerning social responsibility. Corporations are supposed to not only on economic priorities but on societal and environmental implications as well. In the present scenario business organizations must divert the profits to social obligations like medical & and education facilities, hunger & and poverty eradication, a pollution-free environment, and equality of gender. The government has been following constructive initiatives to formalize corporate responsibility toward society from voluntary guidelines to legal obligations. Keeping in view the historical legal reforms, the present study focuses on the empirical analysis of the association between CSR disclosures and corporate financial performance among Indian companies after the enactment of the amended Companies Act. The analyses highlight that companies’ CSR disclosures have a significant impact on their financial performances. The findings of the study are consistent with earlier research, where the CSR disclosure and financial performance relationship is positive. Several companies are engrossed in social obligations towards external and internal stakeholders, as spending on social responsibilities will ensure good financial health. The current research imparts empirical support as well as theoretical support and motivation for the corporate sector towards CSR initiatives.