Assessing the Impact of Mandatory Corporate Social Responsibility Expenditure on Financial Performance: A Study of Selected Indian Banks

  • Authors

    • Bandna Research scholar, Mittal School of Business, Lovely Professional University, Punjab, ‎India
    • Dr. Mushtaq Ahmad Shah Assistant Professor, Mittal School of Business, Lovely Professional University, Punjab, ‎India
    • Dr. Amrit Jyoti Lekharu PGT, Morigaon H.S. & M.P. School
    • Ilias Hussain Research scholar, Mittal School of Business, Lovely Professional University, Punjab, ‎India
    • Prof. Rama Chandra Parida Department of Commerce, Rajiv Gandhi University
    • Dr. Muzzamil Rehman Assistant Professor, Mittal School of Business, Lovely Professional University, Punjab, ‎India
    https://doi.org/10.14419/g49q7e48

    Received date: July 16, 2025

    Accepted date: July 21, 2025

    Published date: July 30, 2025

  • Corporate Social Responsibility (CSR); Financial Performance (FP); Profitability; Market Return; ‎Return on Assets (ROA); Return on Equity (ROE); and Tobin's Q.

  • Abstract

    CSR expenditure was made mandatory in India to ensure that companies contribute to social and economic development, promoting corporate accountability and sustainable growth. This paper analyzes how the compulsory corporate social responsibility spending required by the Indian Companies Act of 2013 affects the financial performance of commercial banks in India. Under the Companies Act, private banks in India are mandated to allocate a minimum of 2% of their average net profits from the preceding three years to CSR initiatives, whereas public banks adhere to the National Voluntary Guidelines of 2009, permitting discretionary contributions of up to 1% of their prior year's profits. This study explores the correlation between corporate social responsibility expenditure and the financial performance of twelve Indian banks over the period from 2014-15 to 2023-24. Financial performance is assessed through profitability indicators such as Return on Assets (ROA), Return on Equity (ROE), Net Profit (NP), and Net Profit Margin (NPM), while the Price-to-Earnings (P/E) ratio and Tobin's Q are employed as proxies for market returns. The results reveal a positive relationship between CSR expenditure and both profitability and market return for Indian banks.

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    Bandna, Shah, D. M. A. ., Lekharu , D. A. J. ., Hussain, I. ., Parida , P. R. C. ., & Rehman , D. M. . (2025). Assessing the Impact of Mandatory Corporate Social Responsibility Expenditure on Financial Performance: A Study of Selected Indian Banks. International Journal of Accounting and Economics Studies, 12(3), 347-358. https://doi.org/10.14419/g49q7e48