THE IMPACT OF MANDATORY CSR ON FIRM PERFORMANCE: AN INTERNATIONAL EVIDENCE

Abstract

This thesis aims to examine the association between mandatory CSR adoption and firm value in selected firms around the world using fixed effect model, where a panel of 49,763 firms over the period from 2000 to 2023 are analyzed from 61 countries. We show that Mandatory CSR is associated with higher firm performance. We further demonstrate that comply or explain is the most effective approach. Indeed, we find that the comply or explain approach results in the highest increase in firm value when compared to all at once approach. It is also observed that CSR information mandated by a government institution results in higher firm performance. Our results remain consistent across various robustness tests, we limit our sample to treatment countries (i.e., countries that implemented mandatory CSR), and the model accounts for endogeneity issues by employing DID design. We also show that the positive effect of mandatory CSR on firm value is stronger in countries with better environmental awareness, and stronger social norms. Additionally, we show that the positive impact of mandatory CSR on firm value is stronger in firms that already voluntarily disclose ESG information (with high overall ESG performance, and high environmental performance, respectively). Thus, policymakers might consider promoting environmental awareness, and voluntary ESG adoption.