Seminar (Dept. of Accounting)

Title: Customer Response to Corporate Social Responsibility: Evidence from Mandatory CSR Spending

Speaker: Hong Zou, Professor, University of Hong Kong

Time：10:00-11:30, May 13, 2025 (Tuesday)

Venue：Room 1008, Mingde Business Building

Language：Chinese & English

ABSTRACT:

We investigate whether customers value firms’ corporate social responsibility (CSR) performance through their purchasing behavior. Our study utilizes difference-in-differences (DID) analyses, leveraging Section 135 of the 2013 Indian Companies Act as a legal shock. This law change mandates that firms meeting certain size criteria allocate a minimum of 2% of the pre-tax profit to CSR initiatives. We conduct product-level analyses to isolate customer responses from confounding factors such as changes in firms’ product mix. Our results show a significant increase in product-level sales following the implementation of the CSR spending mandate. This effect exists for both business-to-business (B2B) and business-to-consumer (B2C) firms, with a stronger impact on B2C firms. Firms in highly competitive industries and those with lower pre-existing advertising expenditure show more pronounced effects. Despite the increased costs associated with CSR spending, firms experience higher profitability and higher R&D investments post-mandate. We extend the existing literature on voluntary CSR initiatives by shedding light on the product market outcomes of mandatory CSR spending and highlighting a bright side of CSR spending regulations.