Do third-party assurance and mandatory CSR reporting matter to philanthropic and financial performance nexus? Evidence from India

Purpose: The purpose of this study is to focus on examining whether third-party assurance (TPA) and mandatory corporate social responsibility reporting (MCSR) matter in the association between philanthropic giving (PHG) and listed firms’ financial performance. Design/methodology/approach: Using the Indian stock market as a testing ground, the study used interactive regression and panel regression to analyse 80 sustainability-reporting firms with 800 firm-year observations between 2010 and 2019. Findings: The first findings show a positive association between PHG and financial performance (return on assets, ROA and stock price returns, SPR). Also, the study shows that the interactive variable of MCSR and PHG has a mixed association with financial performance. The second findings show a positive and statistically significant association between TPA and SPR. Also, the interactive effect of TPA and PHG has a negative association with return on equity (ROE) and a positive association with SPR. The third findings show a negative association between MCSR and financial performance (ROA and ROE) and a positive association with SPR. However, when a firm combines MCSR and TPA, the outcome is a negative association with ROE. The fourth findings show that MCSR has a positive association with TPA. The study control for any form of heteroscedasticity, serial correlation and endogeneity effects. Practical implications: Managers, if given a choice, must opt for TPA over MCSR because the βcoefficient is higher in TPA than MCSR in PHG-financial performance nexus. Originality/value: The study addresses the information asymmetry problem from the application of TPA and MCSR, which is new to an emerging economy context.