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Csr and Financial Performance of Select Indian Firms JOURNAL OF CRITICAL REVIEWS ISSN- 2394-5125 VOL 7, ISSUE 14, 2020 CSR AND FINANCIAL PERFORMANCE OF SELECT INDIAN FIRMS Banureka.R 1, Bhuvana.V 2 1 Associate Professor, Dept.of Management studies, Easwari Engineering College, Chennai, Tamilnadu, India 2 Student, Dept.of Management studies, Easwari Engineering College, Chennai, Tamilnadu, India Received: 14 March 2020 Revised and Accepted: 8 July 2020 ABSTRACT: Companies today are showing enhanced levels of social responsibility. This is either a result of their management vision or due to SEBi regulations or both. The present study has been undertaken to study whether companies can be motivated to be better in CSR activities if it affects financial performance. The study is analyses data from the financial statements of select companies for the years 2015-19. 10 firms were chosen from five different sectors in NIFTY50 firms from National Stock Exchange (NSE). The variables taken into consideration for the study are Return On Assets (ROA), Return On Equity (ROE), Return on Capital Employed (ROCE). Linear Regression method was used for the study. The analysis is unable to stongly establish a relationship between the financial variables chosen and CSR spend. However significant relationship has been found with respect to CSR outlay and the specific financial variable Return on Capital Employed (ROCE). KEYWORDS: CSR, Financial Performance, ROA, ROE, ROCE. INTRODUCTION Corporate Social Responsibility is the highly ethical behavior displayed by the corporate companies. It involves giving back to the society by factoring concerns regarding environment, society etc. These programs centre on the concept that companies can make the world a better place to live in.CSR activities also aim to be able to offset the company’s carbon footprint. In today’s world of climate changes, it becomes imperative to ensure the sustainability of life and business in the future. CSR generally happens in many ways, in the form of philanthropic efforts, environmental conservation, company diversity and labor practices etc. Consumers are increasingly aware of their social responsibility, and actively seek products from businesses that operate in ethical manner. Corporate Social Responsibility denotes that you are a business that takes an interest in wider social and environmental issues, instead of just those that impact your profit margins alone, which will attract customers who share the identical values. Hence, businesses have to make sure that they work on sustainability. The other reasons behind companies embarking on CSR activities are the positive impact on brand image as well as increased brand awareness. Financial benefits too are expected to accrue. Employee motivation and retention are also the effects of CSR activities. All these would lead to competitive advantage for the companies. In the larger interest of all stakeholders, corporate invest in CSR activities. Research is also being undertaken on whether CSR activities of a company affects investors interested in responsible investing. Another reason why CSR spending is being undertaken is due to norms given by the Companies Act requiring companies of a given size to invest 2% of their average net profits (immediate 3 years). SEBI too has mandated that the top 100 listed companies will report their csr activities to its shareholders. This too has provided an impetus to corporate to take up CSR Activities. Some Companies invest in CSR due to their altruistic tendencies. Tata Chemicals have focused on rural development and wild life conservation. Infosys has focused on social developments. BPCL’s CSR is focused on education while M&M has pledged its support to the education of the girl child to name a few. LITERATURE REVIEW Salma Chakroun, Bassem Salhi, Anis Ben Amar and Anis Jarboui analysed the impact of the ISO 26000 (Global corporate social responsibility standard) on financial performance. The variables considered were Return on Assets (ROA), Return on Equity (ROE), Tobin’s Q and Marris ratio. The findings indicate that good corporate governance plays a role in betterment of financial performance. Besides, it helps the companies continue to do well on social, environmental as well as financial parameters [1]. 2560 JOURNAL OF CRITICAL REVIEWS ISSN- 2394-5125 VOL 7, ISSUE 14, 2020 Grizel Menezes to find out impact of CSR spending on financial performance, took three variables into consideration such as ROA, EPS, Net profit. The study aimed to find the impact of financial performance on the of CSR spending of the firm. The data was analysed using panel data analysis. The findings showed mixed results. While Net profits of the firm displayed a significant impact on CSR spending, the other financial variables did not have affect the CSR spending of the firm. [2]. Ahmadu Abubakar examined how corporate social responsibility affects the financial performance of a company. The researcher used POLS model to a panel data of 10 deposit money banks in Nigeria covering the period 2010- 2017. The researcher concluded that there was a significant relationship between CSR and financial performance. The researcher therefore argues that banking sector firms should invest significantly in corporate social responsibility activities [3]. Abilasha.N and Prof.Madhu Tyagi analysed the effectiveness of New Companies Act, 2013 with reference to CSR. The findings reveal that companies spend on CSR is on average 2% in line with the Companies Act mandate. The findings indicate that CSR does have a positive impact on the financial performance of the company measured by select parameters like PBT, ROC, ROE and ROA The study also found a strong positive correlation between CSR spending and financial performance[4]. Rupal Tyagi and Anil K. Sharma studied the relationship between Corporate Social performance and corporate Financial Performance. The researchers analysed the S&P ESG India Index during the timeframe 2005–2011. Their study indicates a neutral, and modest negative relationship between the CSP and CFP. In other words, the researchers concluded that there was a negative correlation between CSR & Financial performance [5]. Woo Sung Kim and Sekyung Oh analysed the relationship between CSR and financial performance of Indian business group firms. They drew a sample from the listed Indian companies and studied their performance & CSR for the timeframe 2010 -15. Their findings indicted that a high CSR outlay need not lead to higher firm value. They too concluded that CSR and ROA did not have any significant relationship.[6]. RESEARCH METHODOLOGY A. RESEARCH DESIGN Research design is that framework of research methods and techniques used by a researcher. A good research design would enable the researcher to conduct his study effectively. The research design which is used in this study is Descriptive Research Design. B. Methodology For the purpose of this study companies from the Nifty 50 have been considered. Five sectors namely Automobile, BFSI, Cement, IT and FMCG have been selected. Under these selected sectors, 2 companies have been selected from each sector. The selected 10 companies are Maruti Suzuki India, Mahindra & Mahindra, HDFC Bank, ICICI Bank, UltraTech Cement, Grasim Industries, Infosys, Tata Consultancy Services, Hindustan Unilever, Asian Paints. The data collected here is secondary data. The data used for analysis is collected from the respective company websites. The data from their financial reports have been used for analysis. The financial parameters considered are - ROA, ROE and ROCE. The impact of CSR on these financial parameters have been analysed for five financial years namely- 2015 to 2019. C. Research Questions RQ1: To study whether the ROA of the selected company is impacted by CSR outlay. RQ2: To study whether the ROE of the selected company is impacted by CSR outlay. RQ3: To study whether the ROCE of the selected company is impacted by CSR outlay. DATA ANALYSIS AND INTREPRETATION TABLE I: CSR CONTRIBUTION OF SELECT COMPANIES(Rs in crores) S.No Company Year CSR Contribution ROA ROE ROCE Maruti 2015 37.25 11.06 15.65 15 1 Suzuki 2016 78.46 12.79 17.95 17.35 2561 JOURNAL OF CRITICAL REVIEWS ISSN- 2394-5125 VOL 7, ISSUE 14, 2020 2017 89.5 14.34 20.17 26.42 2018 125.1 13 18.49 25.83 2019 154.1 11.91 16.25 21.6 2015 83.24 10.08 17.25 13.85 2016 84.95 9.02 14.29 12.49 Mahindra 2 & 2017 83.57 9.11 13.6 14.28 Mahindra 2018 81.27 9.18 14.37 16.95 2019 93.37 9.1 14.01 16.86 2015 197.13 1.73 16.47 66.77 2016 248 1.73 16.91 70.54 HDFC 3 2017 304 1.68 16.26 65.17 Bank 2018 365 1.64 16.45 62.88 2019 439.2 1.69 14.12 55.57 2015 172 1.72 13.89 57.03 2016 212 1.34 11.19 50.29 ICICI 4 2017 200 1.26 10.11 45.09 Bank 2018 170 0.77 6.63 38.54 2019 118 0.34 3.19 38.13 2015 44.46 5.72 10.68 7.62 2016 50.89 6.18 10.95 8.78 UltraTech 5 2017 53.36 6.68 10.97 13.96 Cement 2018 60.71 4.1 8.6 10.88 2019 74.96 4.2 8.78 10.69 2015 20 3.68 4.73 4.15 2016 15.8 5.61 7.7 6.77 Grasim 6 2017 18.06 7.85 9.61 12.6 Industries 2018 29.84 3.29 3.94 6.12 2019 47.14 0.99 1.22 8.62 2015 239 19.67 25.3 25.29 2016 202.3 17.45 20.78 20.75 7 Infosys 2017 289.44 17.29 20.31 27.8 2018 312.6 21.29 25.44 31 2019 342.04 18.62 23.44 31.38 2015 285 30.53 42.4 41.32 2016 360 29.8 35.49 34.9 Tata 8 Consultanc 2017 446 26.35 30.31 38.05 y Services 2018 497 27.72 33.27 41.5 2019 542 30.21 38.1 50.71 2562 JOURNAL OF CRITICAL REVIEWS ISSN- 2394-5125 VOL 7, ISSUE 14, 2020 2015 82 31.65 115.87 88.95 2016 92 29.71 65.88 56.92 Hindustan 9 2017 103.88 30.43 69.18 81.82 Unilever 2018 116.09 30.53 74.02 86.53 2019 126.45 33.78 78.8 92.27 2015 29.87 18.25 31.37 29.39 2016 34.44 19.09 32.18 30.14 Asian 10 2017 47.84 17.39 25.39 35.75 Paints 2018 46.51 16.35 24.29 35.25 2019 52.7 16.23 24.01 33.96 Source: www.bseindia.com, www.csr.gov.in, www.moneycontrol.com Table II: Average CSR Outlay Company Average CSR Maruti Suzuki 96.88 Mahindra & Mahindra 85.28 HDFC Bank 310.67 ICICI Bank 174.4 UltraTech Cement 56.88 Grasim Industries 26.17 Infosys 277.08 TCS 426 Hindustan Unilever 104.08 Asian Paints 42.27 REGRESSION ANALYSIS To study the effect of CSR on financial performance, Linear Regression Analysis has been used.
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