Does CSR spending enhance financial performance? Evidence from India’s Post-2019 enforcement regime

This study examines whether corporate social responsibility (CSR) enhances corporate financial performance (CFP) in India’s evolving regulatory context and how compliance behavior moderates this relationship. For this purpose, balanced panel data of 30 listed companies on Bombay Stock Exchange (BSE) in India, from 2015 to 2024, have been used. The data were analyzed using Method of Moments Quantile Regression (MMQR), a novel approach capturing CSR’s effects across different performance levels, addressing endogeneity and heterogeneity, which have not been considered by traditional models. The findings reveal a robust positive association between CSR–CFP across multiple accounting-based financial performance measures, particularly among high-performing firms, which supports stakeholder and slack resources theories. However, the moderating effect of CSR compliance behavior is weak and inconsistent, indicating that meeting or exceeding mandatory CSR requirements does not systematically amplify the financial returns from CSR spending (CSRS). Consistent with Legitimacy Theory, the post-2019 penalty regime has marginally altered the CSR–CFP relationship by reinforcing compliance-driven CSR engagement. Practically, our results guide managers in aligning CSR for value creation, and inform policymakers to refine compliance laws. Theoretically, this study advances understanding of compliance-performance dynamics in emerging markets. The analysis is restricted to large, listed firms, which are financially strong and highly compliant but may exhibit different CSR–CFP dynamics than mid-tier or smaller firms facing greater resource constraints. Future research may extend this framework to mid/small-cap firms, stratified size-based samples, sector-specific settings and cross-country comparisons to test generalizability across firm sizes.