The moderating role of investor sentiments between sustainability reporting and firm reputation. Evidence from Chinese listed firms

Abstract

AbstractThis study explores the relationship between sustainability reporting, investor sentiments, and firm reputation in the Chinese stock market. Utilizing panel data from 2018 to 2023 on non‐financial A‐share firms in China, this study employs OLS regression and advanced techniques to ensure robustness, including tests for heteroskedasticity and addressing endogeneity concerns through 2SLS, and potentially the two‐step GMM approach. Analysis exhibits a positive relationship between sustainability reporting, investor sentiments, and firm reputation. Strong sustainability practices correlate with more positive investor sentiment and enhanced firm reputation, aligning with sustainable development principles. Limitations include the restricted data timeframe, suggesting broader insights could be gained by extending the analysis period. Additionally, the study's focus on brand equity as a metric for reputation may overlook other facets. Future research could explore alternative reputation metrics and measurement methods. Integrating environmental, social, and governance reporting into corporate strategies can drive long‐term value creation and sustainable development, offering actionable insights for policymakers, investors, and corporate decision‐makers. This study contributes unique insights into how sustainability reporting influences investor sentiment and firm reputation within the Chinese stock market context, leveraging the SR framework and focusing on firms in China, thus providing valuable perspectives on a dynamic market.