Abstract
This study examines how plant location affects a firm’s compliance with CSR spending regulations and the types of CSR spending. Utilizing a longitudinal sample of listed firms in India between 2015 and 2019, we find that firms with plants located in states with higher poverty rates, more serious environmental pollution, higher female labor force participation rates, lower school enrolment rates, and lower disease rates are more likely to comply with the mandatory CSR spending regulation. We also document that firms with plants located in states with higher poverty rates are more likely to contribute to social welfare; those with plants located in more polluted states tend to invest more in environmental protection; those with plants in areas with higher female labor force participation rates and lower school enrolment rates are more prone to contribute to education; and those with plants located in areas with lower disease rates tend to spend on healthcare. In addition, we find that firms with plants located in regions with larger poverty rates, lower school enrolment rates, and larger female labor force participation rates contribute more than the required amounts of corporate revenues to CSR activities. Finally, we document that firms with plats in impoverished and more polluted areas, areas with more female labor force participation, lower school enrolment rates, and lower disease rates are more likely to contribute to more categories of CSR activities. Overall, our paper reveals subnational institutional environments shape CSR spending and the types of spending. The unique needs of regions where a firm’s plants are located affect the firm’s compliance likelihood and channel the firm’s CSR expenditures into specific domains.