Corporate Environmental Performance Leading Financial Performance: Impacts of Social Media Sentiment and Corporate Reputation

ABSTRACT This study examines the interplay between social media sentiment (SMS) and corporate reputation (CR) in shaping the relationship between corporate environmental performance (CEP) and corporate financial performance (CFP). Using a dataset of S&P 500 companies from 2017 to 2022, the results indicate that both CR and SMS positively influence the CEP–CFP relationship. However, when firms have weak reputations, a strong social media presence does not translate positive CEP into improved CFP. This research is among the first to explore the combined impact of SMS and CR on the CEP–CFP relationship, addressing the notable gap in the literature. In addition, the empirical findings offer insights into resource‐based views, legitimacy and ethical investment theories by demonstrating environmental performance as a competitive advantage. This aligns with the ethical investment theory's premise that stakeholders value environmentally responsible business practices. Finally, the study provides practical implications for managers, emphasising the importance of prioritising efforts to build and maintain a positive reputation for effective communication through social media.