This study tries to examine the effect of corporate social responsibility (CSR) expenditure on the corporate performance of listed firms in India. It also tries to examine the moderating effect of business group affiliation and mandatory CSR expenditure on the actual CSR expenditure-corporate performance relationship. This is one of the early studies, which examines the effect of CSR expenditure on firm performance after the implementation of the mandatory CSR norms in India. From an emerging market perspective, this is the first-ever study that explores the impact of business group affiliation on performance-CSR sensitivity. The study period ranges from 2016 to 2021, and the data set consists of 1133 companies (5665 firm-year observations) listed on the National Stock Exchange (NSE), India, as the sample. It employed a dynamic panel data model - more specifically, the System Generalised Method of Moments technique - to examine this issue. The study finds a significant and positive association between CSR expenditure and corporate performance measures. The study also reveals that business group affiliation reduces the CSR-performance sensitivity. Further, we find that mandatory CSR norms have a significant influence on the CSR-performance relationship. Other firm-specific factors such as financial leverage, liquidity, asset turnover, size of the company, market risk, and age of the company also affect corporate performance. The results have implications for policymakers and corporate managers to frame their policies in so as to derive maximum benefits from this government regulation.
