Is more CSR always better? Evidence from India

Purpose Following the 2014 legislation mandating corporate social responsibility (CSR) disclosure and spending, we examine the association of mandatory CSR expenditure with credit ratings in Indian firms. We further explore whether spending beyond the mandated requirement offers additional reputational or rating benefits. Design/methodology/approach Using an unbalanced panel of 703 firms (3,021 firm-year observations) from 2015 to 2023, we employ an ordered probit regression model. Credit ratings are scaled ordinally and mapped from CRISIL classifications. Our results exhibit robustness to endogeneity concerns addressed through a difference-in-differences (DiD) framework. Findings Our findings indicate a direct and significant relation between actual CSR spending and credit ratings, suggesting that firms meeting with the mandatory CSR law are rewarded with better creditworthiness. Voluntary excess spending beyond the mandated level does not further enhance ratings. This indicates that mandatory compliance signals financial strength and stakeholder commitment, whereas excess spending may be perceived as driven by managerial self-interest or lacking economic substance. Originality/value This study contributes novel empirical evidence from India’s unique CSR regulatory environment. It highlights that while mandated CSR compliance enhances creditworthiness, excess CSR investment does not yield incremental reputational benefits. These findings refine our understanding of the strategic implications of CSR under mandatory regimes, particularly in emerging markets transitioning from voluntary to mandatory social disclosure frameworks.