The relationship between environmental, social and governance (ESG) performance and emotional behavior of investors in the presence of information asymmetry

Articles in Press

Document Type : Research Paper

Authors

1 esfahan

2 Assistant Professor/University of Isfahan

10.22103/jak.2024.23751.4078

Abstract

Objective: This study examines the relationship between ESG performance and investor sentiment despite the asymmetric information.

Method:The investor sentiment index will be calculated following the methodology used in the research of Kim and Ha (2010), while the environmental, social, and governance performance will be assessed using the checklist developed by Fakhari et al (2017). Data collection involved the systematic elimination method to select 130 companies listed on the Tehran Stock Exchange from the year 2013 to 2022. To test the first and second hypotheses, multivariate regression with panel data, ordinary least squares (OLS), and robust methods were employed.

Results: The study's findings indicate that improving environmental and governance performance leads to an increase in positive social impact. However, the presence of information asymmetry weakens the connection between environmental, social, and governance factors and investor sentiment. The research reveals that the environmental and social aspects strongly influence investor behavior in the context of environmental, social, and governance considerations. Moreover, information asymmetry positively influences investor decisions related to environmental and social issues. Empirical tests demonstrate that lower levels of investment are associated with stronger reactions to environmental, social, and governance performance, whereas in most cases, the timing of such performance does not significantly impact investment decisions.

Conclusion: Companies that demonstrate environmental, social, and governance performance, as well as a commitment to stakeholders by providing both financial and non-financial information, can improve investors' confidence.

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Journal of Accounting Knowledge

Articles in Press, Accepted Manuscript
Available Online from 24 September 2024

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History

  • Receive Date: 14 July 2024
  • Revise Date: 23 September 2024
  • Accept Date: 24 September 2024

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