Laws that force companies to be 'socially responsible' actually make them less productive and less likely to grow.
Using India's landmark mandatory CSR law as a test case, researchers found that forcing 'ethical' behavior acts like a hidden tax on efficiency. Instead of just doing good, firms saw a decline in output growth and asset efficiency, suggesting that government-mandated altruism can have unintended negative externalities on the broader economy.
The economic cost of mandatory CSR regulation: Evidence from India
SSRN · 6467297
This study examines the economic cost of forced ethical behavior of corporate firms using the mandatory CSR regulation implemented in India in 2013 as the quasi-natural experiment setting and using the Difference in Differences (DiD) approach. Using firm investment, output growth, and asset efficiency as proxies of economic costs, we show that mandatory CSR regulation had a negative impact on these economic measures at the firm-level. The results are robust for alternate specifications and data