The horizontal S-shaped relationship between corporate social responsibility and financial performance: The moderating effects of firm size and industry dynamism

The relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) is inconclusive. Building on CSR power and stakeholder power arguments, slack resource theory, and agency theory, this study constructs a three-stage model to compare CSR benefits and costs. This comparison indicates a horizontal S-shaped CSR-CFP relationship. Using a sample including 27,628 firm-year observations of Chinese listed firms from 2010 to 2020, we find evidence for this horizontal S-shaped CSR-CFP relationship, which reveals that the S curve is more pronounced for smaller firms and for firms operating in more dynamic industries. Our findings contribute to the CSR-CFP literature, CSR power and stakeholder power arguments, and the evaluation of the moderating effects on the S curve. Accordingly, these findings highlight key implications for decision-makers and policymakers.