We investigate the implementation of a 2014 Government of India mandate that requires companies to at least spend 2% of their profits on corporate social responsibility (CSR) activities. Firms that voluntarily engaged in CSR before the mandate reduce their spending significantly down to the suggested 2% level. Firms that did not actively engage in CSR before the mandate increase their spending marginally. CSR spending post mandate is highly sensitive to negative shocks to firm profits, but not to positive profit shocks. CSR spending post mandate is channeled to more opaque venues with limited third-party verification, relative to before the regulation. Our results are consistent with the hypothesis that regulatory intervention dampens managers' intrinsic motivation to "do good" and, hence, could at times be counter-productive.
Rajgopal, Shivaram, and Prasanna Tantri. "Does Mandated Corporate Social Responsibility Reduce Intrinsic Motivation? Evidence from India." Columbia Business School, 2018.
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