CSR regulation and the working capital management policy

Nemiraja Jadiyappa and Rachappa Shette

Global Finance Journal, 2024, vol. 59, issue C

Abstract: This study examined the impact of CSR regulation on the working capital management of Indian firms, using the mandatory 2% CSR spending regulation implemented in India in 2015 as a quasi-natural experiment setup. We used the cash conversion cycle (CC_Cycle) as a proxy to measure working capital management, determining that CSR regulation positively impacted the CC_Cycle. Furthermore, cheaper debt from institutional sources replaced the costly trade credit, which drives this relationship. Our results remained robust for various model specifications, estimators, and sample selection procedures. They were consistent with the views of the financial access hypothesis, suggesting that CSR activities increase firms' access to finance from institutional sources, allowing firms to replace costly trade credits with cheaper institutional capital.

Keywords: CSR; CSR regulation; Cash cycle; Working capital (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 G38 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:59:y:2024:i:c:s1044028324000061

DOI: 10.1016/j.gfj.2024.100934

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