Optimal Corporate Social Responsibility and Asymmetric Deviation Effects on Financial Performance: Evidence From an Emerging Market

ABSTRACT This study examines whether optimal corporate social responsibility (CSR) is linked to improved financial performance and investigates the asymmetric impact of deviations from optimal CSR levels among listed manufacturing firms in an emerging Asian market context. A two‐stage research design is employed using panel data from 187 manufacturing listed firms in Vietnam over the period 2016–2024, with CSR data hand‐collected from firm disclosures. The findings show that optimal CSR is significantly associated with improved financial performance, while both underinvestment and overinvestment relative to optimal thresholds correspond to deteriorating profitability. This study provides novel empirical evidence by developing micro‐level, firm‐specific optimal CSR benchmarks in an emerging market context. Notably, the study documents a statistically significant asymmetric pattern—whereby underinvestment inflicts substantially greater financial harm than overinvestment—a finding that differs markedly from developed market settings. Based on these findings, the study provides valuable recommendations for enterprises and policymakers to enhance financial performance through CSR investment.