Nonlinear impacts of CSR performance on firm risk: New evidence using a panel smooth threshold regression

As a contribution to the academic debate on the financial, social, and organizational impacts of Corporate Social Commitment (CSC), the present paper investigates the relationship between Corporate Social Responsibility Performance (CSRP), addressed as a proxy and a signal of company's social and environmental effective commitment, and firm's total risk. Accordingly, it endorses a robust theoretical framework, hybridizing the stakeholder and the agency perspectives. Based on a large-scale dataset including observations from S&P500 listed companies between 2002 and 2017, the article claims that relationship between CSRP and firm's total risk is nonlinear and wholly negative. Nevertheless, the empirical evidence shows that the mitigating impact of CSRP on the risk appears as more noticeable and marked beyond a defined score of CSRP, suggesting a "threshold effect" induced both by (collective and organizational) learning and responsible regulations, reshaping operational practices. Technically, the paper adopts a non-linear panel data specification based on the panel switching transition model to compute the transition threshold of CSRP, where CSRP is a transition variable.