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We investigate how mandatory corporate social responsibility (CSR) regulations, designed to enhance CSR practices, might simultaneously influence firms¡¯ propensity to engage in Corporate Social Irresponsibility (CSI). Using a difference-in-differences methodology in the context of India where 2013 Companies Act (CA2013) mandates specific firms to allocate funds for CSR expenditure, we find that regulated firms, while increasing CSR expenditures, also experienced a significant reduction in CSI following CA2013 compared to non-regulated firms. This reduction in CSI is more pronounced for firms having strong moral identification, but not for firms facing intense stakeholder pressure and bearing high compliance cost. The results highlight the potential positive spillover effects of mandatory CSR regulation in mitigating CSI and suggest its potential mechanism in internal moral motivation.

qjoanne@ceibs.edu