Purpose This study aims to investigate the paradoxical impact of Corporate Social Responsibility (CSR) on firm performance in firms with family ownership, during periods of economic recovery. While CSR is linked to sustainability and stakeholder trust, its financial impact remains uncertain in emerging economies with varying institutional contexts. Design/methodology/approach This study uses an unbalanced panel of 486 firm-year observations from Indonesian listed firms between 2021 and 2023, applying Fixed Effects Models with robustness checks and subsector analysis. It compares firms in the Basic Materials and Consumer Non-Cyclicals industries to reflect institutional differences between regulatory and market-driven CSR. Findings The results confirm the CSR paradox. While CSR enhances profitability as measured by return on assets, it reduces market valuation (Tobin’s Q), suggesting a degree of investor skepticism. Although family ownership negatively influences both performance metrics, it positively moderates the CSR–Tobin’s Q relationship, suggesting enhanced credibility. However, this effect is not consistent over time and remains insignificant for profitability. Sectoral analysis shows CSR is compliance-driven in Basic Materials, but strategic in Consumer Non-Cyclicals. Research limitations/implications This study’s focus on one emerging market and two industries may limit generalizability. The 2021–2023 recovery period serves as a contextual background where institutional and sectoral instability may influence firm behavior. Practical implications This study integrates Agency, Institutional and Stakeholder Theories to highlight how ownership and industry shape CSR outcomes, emphasizing the need for governance alignment to enhance financial resilience. Social implications This study highlights how credible CSR practices in family firms can contribute to broader financial trust in emerging markets. By reducing perceived risk and enhancing transparency, CSR may help unlock better access to capital and investment, benefiting not only firms but also economic recovery and social stability. Originality/value This study provides novel empirical evidence on the CSR–performance paradox amid ownership and institutional complexity in postcrisis emerging markets.
Mustaqomah et al. (Fri,) studied this question.