Mandatory Corporate Social Responsibility, Stakeholder Management Quality, and Firm Reputation in Indian Listed Companies
Author(s): Padmavathi Krishnaswamy
Affiliation: Department of Corporate Governance and Business Ethics, Jamnalal Bajaj Institute of Management Studies, University of Mumbai, Maharashtra, India
Page No: 89-93-
Volume issue & Publishing Year: Volume 3, Issue 3, 2026/03/28
Journal: International Journal of Modern Engineering and Management | IJMEM
ISSN NO: 3048-8230
DOI:
Abstract:
India's mandatory CSR regime — established under Section 135 of the Companies Act 2013 and requiring firms with net worth exceeding Rs. 500 crore, turnover exceeding Rs. 1,000 crore, or net profit exceeding Rs. 5 crore to spend at least 2% of average net profits on CSR activities — represents the world's first statutory mandatory CSR expenditure requirement for private sector firms. Seven years post-implementation, the regime has mobilised Rs. 1,68,148 crore in cumulative CSR expenditure (FY2015-16 to FY2023-24 per MCA-21 data), yet academic evidence on whether mandatory CSR translates into enhanced stakeholder management quality and firm reputation — the theoretical value creation mechanisms through which CSR investments are expected to generate business returns — remains fragmented and methodologically limited. This study examines the mandatory CSR-stakeholder management-reputation value chain across 224 BSE 500-listed companies over 2015-2024 using a triangulated research design: content analysis of 2,240 CSR annual report disclosures (MCA CSR-2 forms and annual report CSR sections), primary survey data from 1,847 stakeholder representatives across employee, community, investor, and regulatory categories, and firm reputation scores derived from Economic Times Most Respected Companies survey and Brand Finance India 100 rankings. Structural equation modelling reveals that CSR expenditure level alone is not significantly associated with reputation (β=0.09, p=0.18), but CSR programme quality — measured through beneficiary reach, programme continuity, third-party impact assessment, and community need alignment — strongly predicts both stakeholder satisfaction (β=0.51, p<0.001) and firm reputation (β=0.43, p<0.001). Stakeholder management quality partially mediates the CSR quality-reputation relationship (indirect effect: 0.22, bootstrapped 95% CI: 0.14-0.31). Findings challenge the dominant legislative assumption that mandatory expenditure compliance generates CSR value; rather, it is the quality of CSR programme design and stakeholder engagement that generates reputation benefits. Sector-specific analysis reveals pharmaceutical firms achieving the highest CSR quality-reputation coupling (β=0.61), while extractive industries show the weakest (β=0.28), attributable to social licence to operate dynamics and community trust differentials. Policy implications include mandatory impact assessment disclosure, beneficiary satisfaction reporting in CSR-2 forms, and outcome-based CSR tax credit incentives to shift firm behaviour from compliance minimalism to programme quality optimisation.
Keywords:
corporate social responsibility, mandatory CSR, Companies Act 2013, stakeholder management, firm reputation, CSR quality, MCA-21, India, SEM, social licence to operate
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