Firm Performance Relationship Research Articles

How does innovation moderate the CSR impact on financial performance? An exploratory study and an empirical validation in the Tunisian context

Purpose This paper aims to examine the effect of corporate social responsibility (CSR) on firm performance (FP) of companies listed on the Tunis Stock Exchange. Design/methodology/approach This paper reports on two empirical studies. The first was an exploratory qualitative study carried out on a sample of 30 Tunisian companies operating in different sectors. The second empirical study used a panel data regression analysis, to examine data from 46 companies listed on the Tunis Stock Exchange during the 2017 to 2021 period. Findings The results of the exploratory qualitative study pointed out the specificities of the Tunisian context as to the importance of CSR. The results highlighted also the importance of the 2018 CSR law in Tunisia, yet it drew attention to the non-implementation of its applying texts, meaning that CSR is not always enforced in the Tunisian context. Moreover, in this qualitative study, most companies confirmed that CSR is a key factor behind good governance practices. By studying the impact of CSR on various FP proxies, the results highlight that CSR has a positive and significant impact on FP measured by ROA as an accounting variable and stock returns as a market-measure variable. In addition, the authors confirm the moderating effect of innovation on the CSR and FP relationship. Indeed, innovation affects corporate FP differently. It hinders accounting-based FP while fostering the market-based one. Practical implications The study provides insights for managers into how CSR approaches can be used to maximize profits, improve its FP and reputation, while considering the corporate innovative capacities. CSR is a real performance lever for companies, a means of improving their economic, environmental and social efficiency. It enables companies to anticipate constraints and prevent risks, reduce certain operational costs, optimize resources, communicate a good image and stand out from the competition, gain easier access to innovation, strengthen their competitive edge, gain easier access to financing and strengthen their territorial and social roots. Originality/value The main contribution of this paper is the adoption of two empirical approaches. These two methods are complementary. The first is an exploratory qualitative approach aimed at better understanding the current state of CSR implementation by Tunisian companies. The second one is quantitative, a panel data regression analysis. Furthermore, the authors test the moderating effect of innovation on the studied link. To the best of the authors’ knowledge, this is the first paper that investigates the moderating effect of innovation on CSR FP in the Tunisian context. Finally, robustness tests were conducted to test the reliability of this study’s results.

Do Hofstede’s cultural dimensions moderate the CSR-firm performance relationship before and during the COVID-19 crisis?

Purpose This study aims to evaluate the impact of varying cultural dimensions, according to Hofstede, on corporate social responsibility (CSR) performance before and during the COVID-19 crisis. Design/methodology/approach This study examines the moderating impact of Hofstede’s cultural dimensions on the relationship between CSR and firm performance. The database comprises 36,295 firm-year observations from 2,135 firms operating in civil law countries. Findings The findings confirm that CSR investments have a positive impact on firm performance both before and after the COVID-19 crisis. Furthermore, it becomes evident that cultural dimensions play a moderating role in the CSR–firm performance relationship. The crisis has generated a shift in perspective, emphasizing the advantages of CSR in terms of reputation and financial well-being in the post-crisis environment. Originality/value The significance of this study lies in its examination of the relationship between CSR and firm performance within the framework of Hofstede’s cultural dimension theory, before and during the COVID-19 crisis.

Moderating Role of Environment on the Relationship of Competitive Strategy and Firm Performance: Based on Machine Learning and Text Analysis

The impact of competitive strategy on firm performance has been a fundamental and important issue. However, there is a little research on moderating role of environment on the relationship, especially moderating role of different dimensions of environment. This study employs the technology of machine learning and text analysis to obtain the measure value of competitive strategy and environment. On this basis, the research empirically investigates the moderating effect of environmental dynamism, complexity and competitiveness on the relationship between competitive strategy and organizational performance. The results show that both types of competitive strategy can improve corporate performance, environmental characteristics have a significant impact on the causal relationship mentioned above, and there are differences in the moderating effects of different environmental dimensions. Some conclusions are inconsistent with the research of foreign scholars. The differences in conclusions reflect the impact of China's transitional economic environment on corporate competitive strategy decisions and result.

Dynamics of resource allocation–firm performance relationship: Panel autoregressive distributed lag approach

Dynamics of resource allocation–firm performance relationship: Panel autoregressive distributed lag approach

Swimming against the current: the positive effects of counter-cultural HR practices on the calculative/collaborative HR practices–firm performance relationship

PurposeThis paper investigates the effect of counter-cultural human resources (CCHR) practices on firm performance. Specifically, it investigates the impact of national culture [future orientation (FO), in-group collectivism (I-GC), performance orientation (PO), power distance (PD) and uncertainty avoidance (UA)] on the calculative and collaborative HR practice–firm performance relationship.Design/methodology/approachThis study uses data from the CRANET and GLOBE studies to conduct a multi-level analysis of the impact of national culture on the calculative/collaborative HR–firm performance relationship.FindingsIt finds support for both the CCHR and societal-culture fit (SCF) perspectives of national culture, with FO and I-GC supporting the CCHR perspective and the other culture dimensions aligning more closely with SCF.Originality/valueThese findings empirically validate that CCHR practices can help supplement behaviors lacking in the cultural environment in which organizations operate.

Unravelling open innovation determinants and firm performance relationships in CEE and SEE countries

Purpose Open innovation (OI), by now one of the major concepts for the analysis of innovation, is seen as a methodology for collaboratively designing and implementing solutions by engaging stakeholders in an iterative and inclusive service design process. This paper aims to empirically investigate OI capacities, defined as a cooperative, knowledge-sharing innovation ecosystem, and to explore how it can lead to improved performance of firms in Central and Eastern European (CEE) and Southeastern European (SEE) countries.Design/methodology/approach The study builds on the World Bank/European Bank for Reconstruction and Development (EBRD’s) Business Environment Enterprise Performance Survey (BEEPS) dataset for 2009, 2013 and 2019. Primarily, the research model was estimated using log-transformed ordinary least squares (OLS). Taking into consideration that this method might produce substantial bias, yielding misleading inferences, this study is fitting Poisson pseudo maximum likelihood estimators with robust standard errors and instrumental variable/generalized method of moments estimation (IV/GMM) approach for comparative results. Secondarily, the research model was tested using structural equation modelling (SEM) to investigate the relationship between five OI capacities and firm performance.Findings The findings indicate that there is a significant positive relationship between most OI capacities and firm performance, except for innovation, which did not show a statistically significant relationship with firm performance. Specifically, research and development (R&D), knowledge and coopetition are statistically significant and positively associated with firm performance, whereas transformation is statistically significant but negatively associated with firm performance. The IV/GMM estimations’ findings support the view that the firm performance is significantly affected by OI capacities, together with some control variables such as size, age, foreign ownership and year dummy to have a significant impact on firm performance.Originality/value This paper fills an identified gap in the literature by investigating the impact of OI on firm performance executed in the specific CEE and SEE country context.

Re-examining the quality management and firm performance relationships: meta-analytical investigation on moderating effects of national culture differences

PurposeIn the last 3 decades, organization-wide programs and practices based on the Total Quality Management (TQM) philosophy have become central to continuous improvement (CI) strategy in both public and private enterprises. However, there is paradoxical evidence of TQM-firm performance linkage in non-Japanese contexts. This study presents a meta-analysis of empirical research on TQM-firm performance linkage and investigates the moderating influence of national cultural (NC) values on this relationship.Design/methodology/approachMeta-analytical procedures are adopted to analyse 364 effects accumulated from 135 independent samples across 31 nations, for 30,015 firm observations. Additionally, weighted least square (WLS) meta-regression is used to test the moderation effects of four NC dimensions based on the Global Leadership and Organizational Behavior Effectiveness (GLOBE) model.FindingsThe meta-analysis results reveal that the strengths of the association varied across five soft and hard TQM dimensions and three firm performance dimensions Meta-regression indicate that the effectiveness of the TQM program is high in cultures which reward collectivist behaviours, equity of power distribution and avoidance of ambiguity in rules/structures.Originality/valueThe study contributes to international operational management theory on cultural influences on the effectiveness of operations strategies and decisions.

Re-Examining Working Capital Management and Firm Performance Nexus: Does Investment Policy Matter?

Financial crises and macroeconomic imbalances have recently posed serious challenges to firms operating in developing countries. Thus, firms require efficient working capital management (WCM) to remain profitable. The purpose of this study is to examine the impact of WCM on firm performance (FPR) of ‘Food & Personal Care Industry’ of Pakistan using balanced panel data of 22 listed firms for the period of 2006 to 2022. Further, the study estimates the moderating effects of investment policy (IP) on WCM- FPR relationship. The study has used return on assets to measure FPR, while WCM is measured by a comprehensive measure of cash conversion cycle (CCC) comprising accounts receivable period (ARP), accounts payable period (APP), and inventory period (ITP). The findings reveal that CCC and ITP have a significant negative association with FPR, suggesting shorter CCC and ITP increase FPR. However, ARP and APP are positively associated with FPR, suggesting efficient utilization of ACR and delay in payment bills may increase FPR. Moreover, the results show that IP negatively moderates the impact of all components (except APP) of WCM on FPR. These results imply that a conservative IP mitigates the adverse impact of liberal WCM practice on FPR. The study also discussed the useful implications for managers and policymakers along with limitations of the study in the conclusion section.

Being innovative is not enough: a semi-parametric assessment of the efficiency of post-incubation innovative firms

PurposeThis paper aims to assess whether incubation affects the technical efficiency of innovative firms after entering the market. The study of efficiency allows firms to understand how well resources have been used in production processes. The research intends to contribute to the literature on the performance of incubated firms.Design/methodology/approachThis study estimates the relative efficiency of innovative firms adopting a DEA-based two-stage semi-parametric method. Incubation, firm age and initial capital are used for explaining the relative performance of previously incubated firms compared to non-incubated ones over a six-year period of activity. This research focuses on Italian innovative firms using a large sample of companies.FindingsResults show that incubators have a positive and significant effect on efficiency for firms that have been in the market for more than two years. Efficiency also improves with age and with the level of initial capital of the firm.Research limitations/implicationsThis analysis is limited to the quantitative dimension of inputs as reported in the balance sheets, without qualitative considerations.Practical implicationsFindings enhance firms' understanding of the role of incubators as neutral places to develop a business culture of efficiency. From an empirical standpoint, this study provides useful insights to start-uppers who intend to attend incubation programs. Overall, incubators matter to the extent that they enable new firms, net of those that fail to survive in the first two years of activity, to improve their efficiency in the use of inputs. This research also suggests incubators consider the start-ups’ potential of being efficient.Social implicationsFindings provide tips to policymakers when they are called upon to propose funding programs to support prominent firms entering the business scalability.Originality/valueThis study contributes to the literature on the relative performance of post-incubated firms, highlighting the efficiency frontier analysis. This methodological approach is relatively new in this field. It allows researchers to study the innovative firms' performance in relative terms, that is with respect to the input level. It integrates the performance-based with efficiency frontier analysis. Also, this study reinforces the idea that incubators prepare start-ups to develop capacities and managerial skills, which will be useful in post-incubation life to improve their cost competitiveness.

Exploring the Relationship of Audit Committee Meetings, Independency, CEO Duality, and Firm Performance: A Study in Kuwait

By concentrating on audit committee meetings and its impact on business performance, with particular emphasis on market share (MRS), a variable that has up until now gone unexamined in current research, this study offers a novel inquiry into the field of CG. The background for this research was provided by the expanding field of CG investigations and their changing tendencies. By painstakingly examining the impact of CG structures on the financial performance of publicly traded firms in the Kuwait, our study aims to significantly contribute to such new trends. This study takes a ground-breaking approach in examining the link between audit committee meetings and company achievement, pioneering the inclusion of market share (MRS) as a critical performance criterion. Notably, the report examines a sample of 60 listed firms in financial market in the nation of Kuwait. This research carefully analyses the forecasts regarding the impact of CG dynamics on financial profitability using the financial statements of these organizations for the fiscal year 2020. The study used a cross-sectional approach to rigorously test each hypothesis raised by the investigation. The well-known statistical program SPSS 20 is used as the analytical tool for data analysis. The results of this thorough examination produce interesting results. Notably, a link between audit committee meetings and company financial performance is discovered, highlighting the importance of these meetings as a catalyst for improved financial outcomes. It's intriguing that the empirical analyses go a step further and reveal about no discernible link between the number of independency and financial performance. Similar to this, the research's findings show that the idea of CEO duality—in which the CEO also serves as the board's chair—has no appreciable effect on a company's financial performance.

CEO overconfidence and firm performance: A meta-analytic review and future research agenda

Abstract We provide a meta-analytic examination of the CEO overconfidence–firm performance relationship. Our results support a positive relationship between these focal variables. Drawing from trait activation theory and national cultural differences literatures, we find that cross-cultural effects moderate the focal relationship. More specifically, we find that the CEO overconfidence–firm performance relationship is stronger in high assertive, low institutional collectivistic, low in-group collectivistic, high future-oriented, high gender egalitarian, high performance-oriented, low power distance, and low uncertainty avoidance cultures. Consistent with the resource orchestration literature, we also find that entrepreneurial orientation mediates the focal relationship between CEO overconfidence and firm performance. Taken together, our results present a more nuanced picture of the CEO trait–firm performance relationship. In the future, researchers may consider examining additional CEO traits as well as additional contextual factors including internal, as well as environmental, factors.

Triad structure impact on the triad resources-firm performance relationship: Theory and empirical evidence

Logistics triads are an emerging research setting, yet there is little theoretical and empirical understanding of how triad structure impacts triad resources and buying firm performance relationship. This study first develops a typology of triad structure (asymmetric, balanced, symmetric triads). Based on the theories of the resource-based view of the firm, balance theory, and equity theory, this study empirically investigates how each triad structure impacts the triad resources-firm performance relationship. It uses three firm performance metrics: financial, operational, and market. It also tests whether environmental complexity and uncertainty affect the triad structure.The study collected empirical data via a survey of 267 matched supplier-3PL pairs for the same buying firms in three countries: the UK, France, and Greece. Group hierarchical regression models analysed the effects of each triad structure on the triad resources-firm performance relationship. Findings show that each triad structure has different effects on buying firm performance. Symmetric triads outperform other triads in operational performance. Asymmetric triads have a positive impact on financial performance. Findings also uncover significant differences among triadic resources. The study presents several novelties resulting in important theoretical and managerial implications, including exposing theoretical contradictions about the role of triad structure on firm performance and integrating the three theories to understand the links between resources-structure-performance. This study’s findings indicate that all firms in a triad can strategise their resources to yield market, financial, and operational benefits.

Internationalization and firm performance: moderating role of multi-stakeholder initiatives

PurposePrevious scholars have assumed that multinational enterprises (MNEs) can reduce the liability of foreignness and increase profitability by investing in corporate social responsibility (CSR). However, empirical validation of this assumption has rarely been attempted. This study aims to provide empirical evidence that the adoption of multi-stakeholder initiatives, which are globally recognized as signals of CSR, helps MNEs increase profits from internationalization.Design/methodology/approachFixed effect models, which address model misspecification problems, and instrumental variable estimation, which controls for the endogeneity in firms’ choice of internationalization, offer empirical evidence supporting the moderating effects of global multi-stakeholder initiatives on the relationship between internationalization and firm performance.FindingsThis study examines the moderating role of multi-stakeholder initiatives in the relationship between internationalization and firm performance, drawing on signaling and stakeholder theories. The results suggest that the signaling effect of multi-stakeholder initiatives can help MNEs overcome the liability of foreignness and, therefore, profit from overseas markets.Originality/valueAlthough the internationalization–firm performance relationship has been a subject of debate in the field of international business, the role of firms’ stakeholder engagement in this relationship has been largely overlooked in previous studies. In this study, the authors explore the impact of multi-stakeholder initiatives on the internationalization–firm performance relationship. Our primary contention is that multi-stakeholder initiatives have moderating effects on this relationship by reducing the liability of foreignness experienced by MNEs in host countries. Furthermore, the findings suggest that active engagement in multi-stakeholder initiatives significantly contributes to the financial success of MNEs as they internationalize.

Board Leadership Structure and Firm Performance: Moderating Effects of Board Independence

Our study examines the impact of dual leadership on the company’s performance. We also investigate the moderating effects of board independence on duality and firm-performance relationship. The article uses a panel data framework, and the estimation has been carried out using system-generalized methods of moments. The results of our study postulate that dual leadership negatively influences firm performance; however, when the moderator, board independence, is introduced in the empirical model, it affects firm performance positively. We submit that the extensive and complete abolition of CEO duality by Indian regulators may require caution for Indian markets. JEL Codes: G34, L25, C33

Do specific investment and qualification of capability foster or impede firm performance: the moderating role of shared values

PurposeFirms aiming to enhance firm performance require specific investment and qualification of capability. However, the relationship between these factors and firm performance is influenced by boundary conditions. This study focuses on the role of shared values as a governance mechanism in moderating the relationship between specific investment, qualification of capability, and firm performance.Design/methodology/approachDrawing on transaction cost analysis, the authors develop a theoretical model to explore how shared values moderate the relationship between specific investment, qualification of capability, and firm performance. The authors collected data from 156 firms in Cote d’Ivoire, resulting in a sample of 216 observations. The authors employed hierarchical regression analysis and the “pick-a-point approach” to examine how specific investment and qualification of capability impact firm performance at different levels of shared values.FindingsThe results indicate that specific investment and qualification of capability have a partially positive impact on firm performance. Interestingly, shared values are an important moderating variable, acting as a boundary condition that affects the relationship between specific investment, qualification of capability, and firm performance. Specifically, specific investment leads to excellent firm performance only when shared values are not sufficiently high, whereas qualification of capability leads to superior firm performance only when shared values are sufficiently high.Research limitations/implicationsThis study has three research implications. First, this study enriches TCA literature by identifying shared values as a boundary condition and examining the moderating role of shared values. Second, the study findings discover new insights into how specific investment and qualification of capability enhance or inhabit organizational performance at different levels of shared values. Third, this study extends the existing research and reveals the specific conditions for positive or negative relationships between specific investment and organizational performance and qualification of capability and organizational performance.Practical implicationsFirst, compared to specific investment, qualification of capability has greater effect on organizational performance. Second, when considering whether to increase specific investment or/and improve qualification of capability, executives are encouraged to first evaluate their firm's level of shared values and then make appropriate strategic decision accordingly. Third, six tactics are recommended for enhancing shared values.Originality/valueThis study enriches the literature on transaction cost analysis and contributes to understanding the moderating role of shared values. The findings shed light on the specific investment, qualification of capability, and firm performance relationships. Additionally, this research highlights the importance of considering shared values as a boundary condition in examining these relationships.

Delving Into Feminine Stereotypes: Female CEOs and the Corporate Social (Ir)Responsibility–Firm Performance Relationship

In this study, we advance a more nuanced view of gender-based stereotypes about female chief executive officers (CEOs) to shed light on the divergent findings about outcomes associated with their firms’ actions. We draw on gender stereotyping literature and its delineation between prescriptive and descriptive gender stereotypes— how women ought to be/act versus how they actually are/act—to theorize that not all female CEOs embody the same prescriptive feminine ideals and, thus, variance in how they are perceived may affect outcomes manifesting from certain firm actions. Specifically, we theorize that there also exists a “double-edged” sword among female CEOs such that the more a female CEO is seen as descriptively aligning with prescriptive ideals of feminine actions and perceptions, the stronger the associated outcomes for their firms will be, whether positive or negative. We test how perceptions of communality and attractiveness—the two most desirable prescriptive perceptions for how women ought to be—affect the corporate social responsibility (CSR) and irresponsibility (CSiR) to firm performance relationship, which align, or fail to align, respectively, with desirable prescriptive feminine actions of helping or hurting others and society. We find that the more a female CEO descriptively aligns with such communality and attractiveness prescriptions, the stronger the CSR and CSiR to firm performance relationship will be. The results of our study suggest that the gendered beliefs to which female CEOs are subjected are more nuanced and complex than the current literature explains, contributing to theory and practice alike.

Corporate entrepreneurship and firm performance relationship under the moderating effect of environmental dynamism: Replication and extension analysis

The purpose of this research is to understand the relationship between corporate entrepreneurship and firm performance of large firms in emerging economies, with consideration of the moderating effect of environmental dynamism. This is a quantitative and cross-sectional study, utilizing a multivariate second-order hierarchical component model. The partial least squares structural equation modeling method was employed for analysis. The findings indicate a highly positive impact of entrepreneurial orientation on profitability, while corporate venturing had a high but negative impact on profitability. Regarding the growth model, it was shown that entrepreneurial orientation had a positive but statistically insignificant impact on firm growth, while corporate venturing had a highly negative but statistically insignificant impact on firm growth. Interestingly, the results indicate that environmental dynamism did not have a moderating effect in this context. This paper has significant implications for senior management decision-making regarding the importance of corporate entrepreneurship in the growth and profitability of companies. It is recommended that large companies invest in entrepreneurial orientation because of its positive influence on profitability. This research fills a gap in the literature on the relationship between corporate entrepreneurship and firm performance in large companies in emerging economies. It highlights the importance of context-specific contingencies to the impact of corporate entrepreneurship on the performance of large companies and cautions against generalizing results across different countries, even those with seemingly similar contexts. The study confirms the positive relationship between entrepreneurial orientation and corporate profitability, particularly for large companies.

Is ESG Companies' Performance Influenced by Ownership Structure? Evidence in ASEAN

Background: According to studies on sustainability dimensions – environmental, social, and governance (ESG) – companies that effectively address the stakeholders’ ESG expectations are likely to outperform companies that poorly implement ESG principles. Studies show mixed results of the relationship between ESG and financial performance. Besides, ESG adoption in ASEAN countries is still in early stage compared with European countries or US region. Aim: The purpose of this paper is to investigate the relationship between Environmental, Social and Governance (ESG) performance and firm performance of ASEAN listed companies moderated by company ownership structure. Method: This paper selects publicly listed companies in ASEAN stock exchanges with data period of 2017-2021, a total of 607 companies samples with 1,309 data observations. Refinitiv Eikon ESG rating is adopted in this paper to measure ESG performance while ownership structure is measured in three aspects, which include ownership concentration, equity balances, and institutional investor shareholding. Findings: The research found that (1) ESG performance has negative and significant relation to both market-based and accounting-based firm performances, (2) ownership concentration has no significant moderating role on ESG – firm performance relationship, (3) equity balance is only significant in moderating ESG relationship to Tobin’s Q, meanwhile (4) institutional ownership is found statistically significant in moderating the ESG relationship to Tobin’s Q and ROE but not to ROA.

Location is everything: Explorative and exploitative learning, non-scale free resources, and firm performance of German companies

A firm’s aptitude to acquire new knowledge and simultaneously exploit existing capabilities is suggested to improve firm performance. Although resource endowment is important to achieve a balance between exploration and exploitation, the role of a firm’s non-scale free resources on the exploration‒exploitation and performance linkage has gained little attention. We transfer and apply the first longitudinal test of the exploration–exploitation and firm performance linkage in a German sample. We argue and replicate an inverted U-shaped relationship between relative exploration and firm performance. Further, we hypothesize the competition for and the access to non-scale free resources to moderate this relationship. While we do not find support for the latter, we reveal that the competition for non-scale free resources weakens the relationship between relative exploration and firm performance. We contribute to the exploration–exploitation literature by testing the proposed relationship between exploration–exploitation and firm performance in a different geographical setting, advancing the generalizability of this relationship. In order to do so, we make the commonly accepted measurement approach of Uotila et al. (Strateg Manag J 30:221–231. 10.1002/smj.738, 2009) applicable to German-speaking countries by translating, refining, and extending the dictionary proposed by March (1991) with more contemporary words. Moreover, we contribute by investigating the competition for non-scale free resources between companies in the context of exploration–exploitation. We thereby reveal lower competition for non-scale free resources as a success factor for improving the relationship between a firm’s relative exploration orientation and its performance. This seems particularly important since Germany’s economy has been confronted with a decline in its innovative strength and an eminent lack of skilled workforce in recent years.

Corporate social responsibility and firm performance: a threshold analysis of European firms

PurposeThis paper aims to investigate the reciprocal nonlinear relationship between corporate social responsibility (CSR) and firm performance (FP).Design/methodology/approachThe authors used a sample of 814 European firms over the period 2008–2017. The Panel Smooth Transition Regression (PSTR) model was performed as an econometric approach.FindingsFirstly, results show a threshold effect in the CSR–FP relationships within the two directions. More specifically, the authors found that firms are more likely to engage in CSR by surpassing a threshold of 1.231% for return on assets (ROA) and 0.821% for Tobin’s Q ratio. Secondly, the authors also found that the impact of CSR on FP is positive and significant only if the environment, social and governance score surpasses the threshold of 56.780% when the dependent variable is ROA and 41.02% when Tobin’s Q ratio measures performance.Research limitations/implicationsA significant part of the literature supports the linear relationship between CSR and FP from the unique direction (CSR → FP). This study comes to fill this gap by assessing the possible nonlinear relationship. In addition, this nonlinear relationship is tested under the two directions. Therefore, defining the threshold of FP that allows companies to engage in CSR, on the one hand, and the threshold of engagement in CSR that improves FP, on the other hand, could be an exciting topic.Practical implicationsTo get the full benefit from CSR effects, firms should be with better financial performance to be socially responsible.Originality/valueTo the best of our knowledge, few studies have explored the nonlinear relationship between CSR and FP. In addition, this study raises the question of whether this relation is causal. The authors assess the two nonlinear relationships between CSR ? FP and FP ? CSR by determining the optimal thresholds.