Regulation-Induced CSR

Under a comply-or-explain framework, the Indian Companies Act of 2013 mandated that companies spend 2% of their profits towards CSR. In response, aggregate CSR spending increased substantially and most firms spent non-trivial amounts. These activities had a substantial real impact. On average, INR 1 Mn expenditure in education related CSR led to 49 more students enrolled, 2 more teachers, and 0.1 more schools. Furthermore, infrastructure and other facilities at schools also improved. Our analysis suggests that corporate CSR activities, even if undertaken due to external pressure and in absence of clear enforcement mechanisms, can have a substantial positive real impact on society.