The Moderating Effect of Investor Sentiment on the Relationship between ESG Performance and Future Financial Performance: An Empirical Study from Egypt

نوع المستند : المقالة الأصلية

المؤلف

Assistant Professor Accounting Department, Faculty of Commerce, Cairo University

المستخلص

This paper examines the role of investor sentiment in influencing the relationship between Environmental, Social, and Governance Performance (ESG) and future financial performance (FFP). Using a sample of EGX 100 listed companies from 2014 to 2020, we find a positive relationship between ESG performance and FFP.We also find that firm-specific investor sentiment (F-SENT) is negatively associated with overall ESG performance, its individual categories, and FFP. While ESG performance generally leads to positive FFP, firm-specific investor sentiment weakens this relationship. This effect is not significant for overall ESG performance, but the governance category does show a significant negative relationship. The findings offer a detailed insight into the complex interactions between investors, ESG, and firm performance, specifically in the Egyptian market. These insights can guide managers and policymakers in decision-making processes, allowing them to craft strategies that align with investor behavior. This study enhances our understanding of how firm-specific investor sentiment impacts ESG performance and FFP, contributing novel empirical insights to the relationship between ESG and FFP.

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