PurposeThis study, based on the instrumental approach of the stakeholder theory, examines the firm performance of public and private sector firms in the mandatory corporate social responsibility (CSR) expenditure regime in India. CSR was legislated in India in the year 2014.Design/methodology/approachThe study hypothesizes that firms which fulfill the mandatory CSR expenditure requirement will have a higher firm performance and uses one-way ANOVA and post-hoc test for analysis. Firm performance is examined with respect to firm value and market performance.FindingsThe instrumental approach of the stakeholder theory is not supported in the mandatory CSR expenditure regime in India. The public sector firms that comply with the mandatory CSR expenditure requirement have a lower firm performance. Further, the private sector firms that meet the mandatory CSR expenditure criterion do not have a significantly different firm performance than the private sector firms that do not fulfill this criterion.Practical implicationsThe study indicates as to why some firms fail to meet the CSR expenditure compliance. It also gives suggestions on how regulators and government agencies can solicit the participation of the Indian firms to undertake CSR initiatives. The study further suggests how firms may reap maximum benefit from the CSR expenditure.Originality/valueSince CSR expenditure has been made mandatory only in the year 2014 in India, hardly any study has examined firm performance in the mandatory CSR expenditure regime in India.

The present study examines the relevance of Corporate Social Responsibility (CSR) expenditure to the firms in the mandatory regime in India. The paper has its theoretical basis from the instrumental aspect of the Stakeholder theory, which assumes a positive influence of CSR over financial performance. Therefore, the study hypothesizes that the firms which fulfill the CSR expenditure requirement will exhibit higher stock returns and lower systematic risk. Since India mandated CSR in the year 2014, the data of four years (2016-2019) for the sample of 426 National Stock Exchange (NSE) listed Indian firms are taken to employ the OLS regression method. The CSR expenditure in the mandatory regime was not found to be relevant to the firms because of an insignificant positive impact of mandatory CSR expenditure on stock returns. Thus, the instrumental aspect is not supported by the findings. However, the findings indicate a decrease in the systematic risk of the firms. Only a few studies in India investigated this phenomenon in the mandatory regime. Further, the contributions of the study to the CSR literature are fairly useful from the perspective of firms, investors, policy-makers, regulators, scholars, and countries that are planning for legislating CSR.

No abstract

This study aims to empirically investigate the association between degree of leverages, operating and financial, and firm value in the context of India, one of big ten emerging markets (Garten, 1997). This study examines this association for 231 manufacturing firms listed in National Stock Exchange (NSE) in India over a period from 2001-2002 to 2010-2011. The independent variables, degrees of operating and financial leverage, and a market price-based dependent variable, called price-earnings ratio as a proxy of firm value, are taken to examine this relationship by using standard ordinary least square regression Asian Journal of Finance & Accounting ISSN 1946-052X 2016 ajfa.macrothink.org 213 models at the levels of individual firm and portfolio of firms. The findings of this study show a statistically significant negative relationship between firm value and degree of operating leverage and a statistically insignificant relationship between firm value and degree of financial leverage both at the levels of individual firm and portfolio of firms. Using the data from a country like India, one of fastest growing emerging markets in the world, this study provides an important insight on the effect of leverages on the firm value, the association between independent accounting variables and stock price-based dependent variable, to the practitioners, the scholars and the finance managers.

No abstract

No abstract

Transfer pricing in an economy is very significant to corporate policy makers, economic policy makers, tax authorities, and regulatory authorities. Transfer pricing manipulation (fixing transfer prices on non-market basis as against arm's length standard) reduces the total quantum of organization's tax liability by shifting accounting profits from high tax to low tax jurisdictions. It changes the relative tax burden of the multinational firms in different countries of their operations and reduces worldwide tax payments of the firm. This paper explores the influence of corporate taxes and product tariffs on reported transfer pricing of Multinational Corporations (MNCs) in India by using the Swenson (2000) model. This study of custom values of import originating from China, France, Germany, Italy, Japan, Singapore, Switzerland, UK, and USA into India reveals that transfer pricing incentives generated by corporate taxes and tariffs provide opportunity for MNCs to manipulate transfer price to maximize profits across world-wide locations of operations and reduce tax liability. The main findings of this paper are: The estimates computed by grouping together products of all industries being imported into India from sample countries reveal that TPI coefficients are positive and significant. Overall, positive and significant coefficients of TPI predict that one per cent reduction in corporate tax rates in the home country of the MNC would cause multinational corporations with affiliated transactions to increase reported transfer prices in the range of 0.248 per cent to 0.389 per cent. The Generalized Least Square estimates for individual industries display that out of nine industries in the sample, three industries (38, 73, and 84) have a positive and significant co-movement with transfer pricing incentives. In four industries (56, 83, 85, and 90), coefficient of Transfer Pricing Incentive (TPI) is negative but significant. In case of two industries (39 and 82), TPI coefficient is negative but not significant. Positive and significant coefficients of TPI predict that one per cent reduction in corporate tax rates in the home country would cause multinational corporations with affiliated transactions to increase reported transfer prices by 1.20 per cent in ‘Miscellaneous Chemical Products’ Industry (Industry 38), 0.175 per cent in the ‘Articles of Iron or Steel’ Industry (Industry 73) and 0.908 per cent in �Nuclear Reactors, Boilers, Machinery and Mechanical Appliances; Parts thereof' Industry (Industry 84). In industries where coefficient of TPI is negative and significant, MNCs would like to shift the taxable income of their affilates to the host country by decreasing their reported transfer price. The government's approach should be to reduce corporate tax and tariff rates to bring them at a level comparable with countries across the world which will reduce incentives for the MNCs for shifting of income out of India and increase the tax base for tax authorities. This will also result in an increase in the tax revenue of the country.

This study provides an empirical support to the relevance of very prevalent and well-established almost a century ago the DuPont Identity in the context of India, one of big 10 emerging markets (Garten, 1997). The DuPont Identity, a familiar form of financial statement analysis (Soliman, 2008) for use in equity valuation (Nissim and Penman, 2001), decomposes the return on equity (ROE) into three multiplicative components: net profit margin (operating efficiency), assets turnover ratio (asset use efficiency) and equity multiplier (financial leverage). The present study is based on the valuation theory which considers the viewpoint of equity investors to empirical investigate the value relevance of accounting information (Beisland, 2009). In this study, value relevance of three measures of accounting information used in the DuPont Identity is investigated for 228 manufacturing firms listed in National Stock Exchange (NSE) of India over a period of ten years from 2006-07 to 2015-2016. The findings indicate that the firms should focus on asset use efficiency and financial leverage components of DuPont Identity since a statistically significant impact of these two components on the stock returns is found. The strategic use of asset efficiency and financial leverage inevitably ensures the operating efficiency of the firms. This empirical investigation is an addition to the value relevance literature with an important insight to the firms and the participants of stock market about the usefulness of DuPont Identity in the context of India.