Investor sentiment, corporate social responsibility, and financial performance: Evidence from Japanese companies
Year: 2022
Type: article
Abstract: Utilizing data from 367 Japanese companies from 2005 to 2019, this paper investigates the relationship between investor sentiment, corporate social performance (CSP), and financial performance (FP). The empirical results obtained from the panel fixed effects and instrumental variable regressions reveal a positive impact of firm-specific sentiment on future FP. Conversely, the market sentiment effect is mixed as it positively influences Tobin's Q but negatively influences the return on assets (ROA). The impact of CSP, measured by environmental, social, and governance (ESG) scores, on FP is similar to that of market sentiment. Specifically, we find that an effective ESG performance in the prior year, both the overall performance and the performance of the individual aspects, can escalate firm value but diminish firm profitability in the following year. We claim that the CSP–FP relationship weakens under the moderating influence of investor sentiment.
Source: Borsa Istanbul Review
Author: Ngoc Bao Vuong
Institution: Hiroshima University
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,500
OpenAlex ID: W4284890267