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Beyond the linear link: Threshold effects of CSR on financial performance

Author

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  • Lahouel, Béchir Ben
  • Taleb, Lotfi

Abstract

This article intends to re-examine the link between corporate social responsibility (CSR) and financial performance (FP) in the airline sector using a panel of 28 major airlines between 2005 and 2019. Like general management literature, there is no unambiguous agreement on this link in airline research. To determine the threshold impacts of corporate social responsibility that define the smoothness of regime-switching, we use the panel smooth transition regression (PSTR) model. Our findings demonstrate that the link is nonlinearly positive and that, because of the marginal costs and marginal gains of CSR investments, the form of the curve changes once a threshold level is reached. To determine the firm- and time-specific effects of CSR on FP, we also build and estimate an instrumental variable PSTR model to account for any endogeneity biases. Overall, our findings hold up to several FP metrics and additional endogeneity-accounting methods.

Suggested Citation

  • Lahouel, Béchir Ben & Taleb, Lotfi, 2025. "Beyond the linear link: Threshold effects of CSR on financial performance," International Review of Economics & Finance, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:reveco:v:100:y:2025:i:c:s1059056025002497
    DOI: 10.1016/j.iref.2025.104086
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