Mandatory CSR expenditure and stock market liquidity
利用印度强制性CSR法规作为准自然实验，发现合规企业的股票流动性显著提高，且教育医疗支出效果更明显，长期估值更高。
We investigate the nexus between corporate social responsibility (CSR) and firms' stock market liquidity. Using actual firm-level CSR expenditure data and a quasi-natural experiment setup of a mandated CSR regulation in India, we find that firms complying with the mandate experience significantly higher stock market liquidity, relative to non-CSR firms in the post-CSR mandate period. This effect seems to be more pronounced among CSR firms not affiliated to business groups, with concentrated promoter ownership, with low institutional ownership, with foreign sales and having operations in multiple locations. Further, we find that firms spending more on education and healthcare projects as part of their mandatory CSR engagement have higher stock market liquidity. Our results are in line with the conjecture that mandatory CSR regulation could lead to reduced information asymmetry and improved social and reputational capital, and thus improve the stock market liquidity of CSR firms. Finally, we show that mandated CSR firms, having superior stock market liquidity, obtain higher market valuations in the long run.