The Moderating Role of Online Social Media in the Relationship between Corporate Social Responsibility Disclosure and Investment Decisions: Evidence from Egypt

Abstract

Despite the spread and progress in the literature related to the disclosure of corporate social responsibility (CSR) performance around the world as one of the most essential tools for achieving sustainable development in society, its value relevance is still uncertain. Using a survey approach involving investors dealing in stocks of 60 enterprises listed on the Egyptian Stock Exchange (EGX) and included in the environmental, social, and governance index (S&P/EGX ESG index) and the equal-weight index (EGX100 EWI index), we empirically examine the importance of CSR financial performance disclosure by examining the extent to which it can influence investors’ choices. In addition, we assess whether company reputation acquired through online social media (OSM) influences the extent to which CSR performance disclosure influences such judgments. To examine these matters, we conduct two tests: the first examines the influence of disclosure of company environmental activities on investors’ decisions and the other examines the influence of disclosure of company social activities on investor decisions. Turning to our key results, we find that investment decision makers in both experiments tend to invest only in companies that have higher CSR performance scores. In the context of OSM, we provide and discuss empirical evidence that investment decision makers are more responsive to investing in companies included in the S&P/EGX ESG index, which have a positive e-reputation for CSR performance, than companies included in the EGX100 EWI index, which do not have such a reputation, which confirms that e-reputation, as one of the most important outputs of OSM, has a marginal impact on investment decisions and moderates the relation between disclosure of high CSR scores and investors’ decisions. Therefore, this paper presents a modern starting point for CSR experts and academics, particularly in the emerging markets. In general, our paper expands the CSR-related investment literature. In line with the affect-as-information theory, our paper also expands the OSM literature by indicating that the effects of OSM depend on the information context, where failure to provide information to investors or other stakeholders in a timely manner may render the information useless.