The influence of CSR on firm value: an application of panel smooth transition regression on Taiwan

Previous studies on the relationship between corporate social responsibility (CSR) and firm value generally belong to one of the two opposing schools of thought: the social impact hypothesis and the shift of focus hypothesis. This study, however, proposes that the relationship between CSR and company value is non-linear and neither wholly positive nor negative. We employed the corporate social responsibility index (CRSI) to test this hypothesis. The panel smooth transition regression (PSTR) model was used to analyse listed Taiwanese firms from 2010 to 2012 and calculate the value transition threshold of CSR, using CSRI as the transition variable. We then applied PSTR to determine whether CSRI shows a two-regime, non-linear relationship, as inferred by our model. Empirical findings show that the threshold value of CSRI is 13.082, thus, we concluded that investment in CSR does not contribute to enhancing company value until it exceeds the value transition threshold.