P-19 Investors’ Reaction to the Passing of the Indian Companies Act, 2013

This research seeks to determine whether mandated corporate social responsibility (CSR) is value relevant to investors, specifically investors of Indian companies affected by the Companies Act, 2013 which requires companies meeting specific financial criteria to spend 2% of their three-year average net profits towards social initiatives. Using the event study methodology, this study compares the cumulative abnormal returns (CAR) of companies perceived as environmentally friendly on the Bombay Stock Exchange (BSE) with those not considered environmentally friendly. We found that affected companies considered environmentally friendly have significantly better CAR than other affected companies. This finding suggests that mandating CSR is relevant to investors.