The Effect of Investor Sentiment on the Relationship between Corporate Social Responsibility, and Corporate Financial Performance

Objectives: Behavioral finance examines how psychological factors shape investor decision-making under uncertainty. Given that investor perceptions and sentiments influence investment choices, pricing, resource allocation, and returns, this study aims to investigate the effect of investor sentiment on the relationship between corporate social responsibility (CSR) performance and the financial performance of companies listed on the Tehran Stock Exchange. Methodology/Design/Approach: The study employs a quantitative approach using data from 82 companies over the period 2012–2021. Linear regression analysis was conducted using EViews software to test the research hypotheses and evaluate how investor sentiment interacts with CSR and corporate financial performance (CFP). Findings: The results demonstrate that investor sentiment negatively affects corporate financial performance, whereas corporate social responsibility has a positive influence on financial performance. However, investor sentiment does not play a moderating role in the relationship between CSR performance and corporate financial performance. Innovation: By integrating behavioral finance concepts with corporate social responsibility and financial performance, this study provides new insights into the behavioral dynamics of investors in emerging markets. It highlights the independent and contrasting effects of investor sentiment and CSR on firm performance, offering implications for managers, investors, and policymakers concerned with sustainable value creation.