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Is better banking performance associated with financial inclusion and mandated CSR expenditure in a developing country?

journal contribution
posted on 23.09.2020, 00:00 authored by Asit BhattacharyyaAsit Bhattacharyya, S Wright, ML Rahman
Motivated by legislation mandating CSR expenditure to improve social equality and economic development in India, we examine the association of CSR expenditure and financial inclusion with the performance of banking firms in the period after introduction of the legislation. We study whether mandated CSR expenditure and/or financial inclusion measures are associated with better financial performance, using both accounting and stock market measures of performance, for Indian banks during 2015–2017. Our results demonstrate that level of CSR expenditure and degree of financial inclusion is not associated with banks' financial performance when performance is measured in accounting terms. However, a significant negative association is found when performance is measured by stock market return. These results suggest that the current design of the legislation is unlikely to achieve its purpose. This is the first study to present clear evidence on the associations of mandatory CSR spending and firm‐level financial inclusion with accounting‐based and market‐based bank performance.

History

Start Page

1

End Page

37

Number of Pages

37

eISSN

1467-629X

ISSN

0810-5391

Publisher

Wiley

Language

en

Peer Reviewed

Yes

Open Access

No

External Author Affiliations

University of Newcastle

Era Eligible

Yes

Journal

Accounting & Finance