The Effects of ESG issues on investment decision through corporate reputation: Individual investors’ perspective

Abstract

Whether investors take into account a company's environmental, social, and governance (ESG) issues when making investment decisions (ID), how they interpret corporate reputation (CR) as a result of ESG issues, and whether CR mediates the relationship between ESG issues and ID are the goals of this study. The theory of planned behavior (TPB) and the signaling theory are the bases of the framework. The study was based on a questionnaire survey that received 599 responses from active retail investors in two Bangladeshi cities, Dhaka and Chattagram. The PLS path modeling method was used to analyze the data and test the hypothesis. The empirical findings reveal that corporate ESG issues considerably impact ID and that CR mediates this relationship. This study contributes to behavioral finance by offering empirical proof of the relationship between company ESG issues and investment decisions. By examining the indirect effects of ESG issues on ID via CR, this study contributes to the body of knowledge. It is therefore advised that strategic managers be required to use ESG practices as it builds reputation. At the same time, the government should create public policies, orders, and rules for upholding the ESG issues that contribute to the sustainable development of the capital market and the economy.

ESG performance, investor attention, and company reputation: Threshold model analysis based on panel data from listed companies in China

“…Moreover, while the academic community has not directly discussed the connection between ESG and reputation, studies have already demonstrated that a company's reputation plays a mediating role in the relationship between ESG performance and debt costs [ 28 ]. Additionally, corporate reputation has been shown to mediate the significant positive impact of ESG on investment decisions [ 29 ]. These findings provide evidence for the significant relationship between ESG performance and company reputation that this article urgently seeks to explore.…”