THE ROLE OF ESG CRITERIA IN INVESTOR BEHAVIOR: ANALYZING THE INFLUENCE OF ESG CRITERIA ON INVESTOR DECISIONS AND BUSINESS SUSTAINABILITY
DOI:
https://doi.org/10.63878/jalt2001Keywords:
ESG requirements, investment behavior, sustainability, corporate governance, responsible investment, Pakistani stock exchange.Abstract
The increased focus on responsible investment in the world has put the Environmental, Social, and Governance (ESG) framework at the center stage of finance decision-making. The stockholders of the developed and emerging markets, such as Pakistan consider ESG indicators to be crucial in determining corporate credibility, transparency and the ability of a company to survive over time. This is an empirical research undertaken to explore the effect of ESG criteria on investors and the role it plays on the sustainability of businesses. Having examined the quantitative data collected by 400 individual and institutional investors listed on the Pakistan Stock Exchange (PSX), the study examines the correlation between the three pillars of ESG including environmental responsibility, social engagement, and governance integrity and the implications of these factors on the investor decision patterns, inferred risk, and confidence in corporate performance. The results of a systematic survey and intensive statistical analysis, including reliability test and regression model, indicate that the variables of governance have the most significant effect on the investor decision-making, then comes the social and environmental factors. There are also greater chances of firms that score high on ESG attracting consistent investors, reducing market volatility, and having better performance in the long run. These findings form part of the global ESG body of work in that they identify the phenomenon in a developing market and provide meaningful advice to investors, regulators, and corporate leaders who are interested in improving their sustainability practices and competitive positioning.
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