The Dynamic Impact of CSR on the Relationship Between Financial Performance and Firm Value

Using data from 404 businesses listed on the Indonesia Stock Exchange from 2012 to 2018, this study employs a panel smooth transition regression (PSTR) model to explore the nonlinear relationship between sales and net income, key financial performance indicators, and corporate performance (Tobin’s Q) within the context of a corporate social responsibility (CSR) threshold. The empirical results confirm a significant CSR threshold effect, indicating that the relationship between financial performance and firm value is nonlinear. When CSR exceeds the threshold value, sales positively affect Tobin’s Q, whereas sales exert a negative effect below the threshold. Net income remains negatively associated with Tobin’s Q in both CSR regimes; however, the magnitude of this negative effect becomes substantially smaller once the CSR threshold is exceeded.