From Responsibility to Returns: How ESG and CSR Drive Investor Decision Making in the Age of Sustainability

Abstract

This paper examines the moderating role of corporate social responsibility (CSR) on the relationship between environmental, social, and governance (ESG) dimensions and investor decision-making in Jordan. Data were collected using a structured questionnaire designed for institutional investors and financial analysts, capturing perceptions of ESG, CSR, and investment behavior. A stratified random sample of 350 professionals across the financial, industrial, and service sectors was surveyed. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The findings show that environmental and social dimensions have positive effects on investor decisions, with governance dimensions having a negative effect. Notably, CSR has a negative moderating effect on the governance dimensions and investor decision, with no observed statistical moderating effect for environmental or social dimensions. This research unravels the multidimensional role of CSR in building the ESG-investor decision interface and identifies a counterintuitive negative moderating impact of CSR on governance, contributing to the existing literature on sustainability alignment in emerging markets. The results offer practical implications for companies aiming to attract sustainability-oriented investors by indicating the necessity for an integrated and genuine CSR and ESG approach.

1. Introduction

During the last ten years, ESG considerations have increasingly become an integral part of the policies that steer institutional investments as a more concerted appreciation for their capacity to impact long-term financial returns and risk management strategies realize corporate sustainability (Hanaysha et al., 2025). As Morningstar (2023) reports, net flows worldwide across funds based on ESG considerations exceeded USD 63 billion in 2023, proof of a strong interest in sustainable investment options. The Global Sustainable Investment Alliance (2021) further reports that the total asset value of sustainable investments in Europe rose from USD 12 trillion in early 2020 to USD 14 trillion in early 2022, an amount which had outstripped the global total of USD 30 trillion over the same period. The growing interest in ESG investments is a reflection of a significant change in investor interests, which are increasingly prioritizing sustainability in addition to conventional financial returns (Sciarelli et al., 2021; Saleh et al., 2025).

The integration of environmental, social, and governance (ESG) factors into investment decision-making processes is increasingly becoming more common among investors (Rumansyah & Nainggolan, 2025). This trend is mainly driven by increased concerns over climate change, corporate governance practices, and social responsibility. The growth of ESG-driven investment strategies has instigated a reconsideration of corporate goals, forcing organizations to evolve in line with the evolving expectations of stakeholders (Ab Aziz et al., 2025a). However, a number of issues still exist, particularly the lack of standardization in ESG reporting approaches (Chopra et al., 2024). The existing literature shows that a single ESG score does not do justice to the heterogeneity of values and priorities of investors, necessitating the development of broader and multi-faceted assessment frameworks (Escrig-Olmedo et al., 2017). Against this backdrop, investment companies and global asset management institutions are increasingly diversifying their portfolios to cover an increased range of green funds to cater to the growing demand for sustainable investment options (Ning et al., 2023).

Within the push for sustainability, accounting has had to step up to meet the need for inclusive, transparent, and credible disclosure of environmental, social, and governance (ESG) factors (Dasinapa, 2024). As investors are looking for precise information to make decisions, the need for standardized frameworks of disclosure to enable a tangible understanding of a company’s ESG performance is becoming more pressing (Arvidsson & Dumay, 2022). Institutional investors are being forced to include ESG in their considerations alongside corporate risk, valuations, and expected returns. As a result, accounting has expanded its scope from traditional financial reporting to include the evaluation and reporting of ESG information that can impact a company’s long-term performance and its exposure to risks (Tettamanzi et al., 2022). Despite the ongoing academic debate on ESG and investor decision making, the evidence so far is inconclusive: Some studies show a positive relationship between high ESG ratings and firm performance; others show mixed or no findings (Ab Aziz et al., 2025b; Gillan et al., 2021). Starks (2023) identifies two approaches to ESG investing: one driven by financial goals, where ESG is seen as a determinant of corporate value, and one driven by non-financial goals, where ethical or social interests trump profit motives. Insights from these motivations underpin the process of how ESG considerations influence investor decision-making factors to be weighed in light of the role of accounting in measuring and revealing those factors (Helfaya et al., 2023).

Alongside ESG factors, corporate social responsibility (CSR) is a key driver of investment decisions. Aligned with stakeholder theory, CSR is an enterprise’s voluntary actions toward advancing the cause of socially and environmentally focused goals ahead of profit, in response to the demands and expectations of its diverse range of stakeholders, such as investors, the workforce, and society at large (Wahab et al., 2024; Al-Muntasir, 2022; Oreqat, 2021). CSR can be used as a moderating variable in the nexus between ESG performance and investor preference. Through facilitating corporate reputation, expression of interest in sustainable practices, and reduction in perceived risk from environmentally and socially related issues, CSR activities form part of what facilitates corporate actions in alignment with the interests of the firm’s different stakeholders (Ardiansyah & Alnoor, 2024). Such alignment, as informed by stakeholder theory, is argued to influence investor behavior by inspiring confidence that the company is working in the long-term interests of the firm’s stakeholders. As a moderating variable, CSR will enhance or weaken the effect of ESG factors for investment decisions based on the degree of convergence with investor values and priorities (Abdel Magid et al., 2023). By extension, therefore, organizations with strong CSR approaches are seen as sustainable and less risky and are thus likely to enhance investor confidence and affect investment choices (Ardiansyah & Alnoor, 2024).

Growing concerns over the integrity and reliability of ESG disclosures have come into sharp focus. Studies show that ESG scores like those from Bloomberg tend to line up much more closely with what investors expect to see than do the more in-depth, qualitative assessments that organizations like Sustainalytics provide. That is a pretty clear sign that standard, accurate ESG reporting is urgently needed. Investors need to be able to gauge not just a firm’s commitment to sustainability but also its financial health and its real exposure to risks. That is exactly what is driving the growth of investment products based on ESG factors. And as more institutional investors turn to international frameworks like the United Nations Principles for Responsible Investment (PRI) (PRI, 2023), it is clear that ESG factors are becoming increasingly central to their activities.

Given these developments, this study aims to explore how sustainability factors influence investment behavior in emerging markets. Specifically, it seeks to address the following research question: To what extent do ESG performance dimensions and CSR moderate investor decision-making, and how does accounting mediate the relationship between ESG disclosure and investor preferences in the Jordanian context?

This paper contributes to the scholarship by emphasizing the facilitating role of accounting practices in ESG disclosures and exploring the moderating effect of CSR in influencing investment decision-making in the Jordanian context. This study aims to measure ESG knowledge, CSR leadership, and investor decision-making using validated scales from prior literature. The constructs were operationalized through a structured survey instrument based on a 5-point Likert scale and adapted to the Jordanian context through back-translation and expert validation. Detailed measurement procedures are described in Section 3.3.

This paper brings to the forefront the significance of quality and standardized ESG reports and their impact on institutional investment choices. This paper bridges the existing knowledge gap in the scholarship related to ESG and CSR for Jordan and opens the way for future studies, as well as draws out the most salient implications for policymakers, investors, and accounting professionals in Jordan and other emerging countries. This paper is also very timely against the ongoing evolution of global investment practice with the inclusion of ESG factors and the growing usage of ESG factors by institutional investors in Jordan. In addition, this research focuses on how the desire for ESG-compliant investments by institutional investors affects portfolio choices with financial and ethical motivations. Looking at the contribution of accounting to the enhanced ESG disclosures and the intermediary contribution of CSR, this research seeks to comprehend the altered dynamics of investor attitudes when presented with sustainability. Through the incorporation of an overview of the interaction between ESG determinants, CSR, and investor positions, this research contributes to the existing research on ESG investments as well as determines the critical contribution of accounting towards the promotion of sustainable investment strategies.

The structure of this paper is as follows: Section 2 deals with the literature pertaining to ESG, CSR, and investment decision-making. Section 3 deals with the data collection and instrument design. Section 4 deals with the analysis of the data and the findings, followed by Section 5, the discussion of the findings. Section 6 brings this study to a close, deals with theoretical and practical implications, and presents recommendations for further research.

2. Literature Review and Hypothesis Development

The theoretical foundation of this research is the application of the stakeholder theory, signaling theory, and legitimacy theory as a framework for the explanation of the impact of environmental, social, and governance (ESG) performance on investor decision making. Stakeholder theory (Freeman, 1984) posits that corporations are responsible to a broad set of stakeholders, not just shareholders, and that ESG investment is an indication of responsiveness to such interests, with the consequence of developing trust and long-term value creation. Building on this supposition, signaling theory (Spence, 1973) posits that ESG disclosures are credible signals in informationally asymmetric markets since corporations use ESG performance to signal management quality, the capacity to handle risks, and ethical attitude. Furthermore, legitimacy theory (Suchman, 1995) focuses on the conformity of organizational practices with the demands and expectations of the external world. Corporations that make an active attempt to advance ESG considerations make themselves more legitimate in the eyes of investors, who would regard such compliance as a strategic move towards reducing reputational and regulatory risks. Moreover, accounting practices play a critical enabling role in facilitating ESG disclosures (Shubita, 2022). As the language of business, accounting frameworks ensure that non-financial ESG information is reported in a standardized, comparable, and credible manner, which significantly influences investor trust. High-quality ESG accounting practices can reduce information asymmetry and enhance the signaling effect of ESG data, particularly in emerging markets like Jordan (Alqudah et al., 2024; Alzuod et al., 2025; Ahmed et al., 2023; Taqa, 2025).

All the theories together constitute a general framework for the explanation of how and why ESG performance impacts investor action and, specifically in developing economies such as Jordan, where formal institutions are still developing and trust for non-financial disclosures is emerging.

2.1. ESG and CSR in the Jordanian Context

Investment decision-making in Jordan traditionally had been based on financial performance measures. However, in the past decade, environmental, social, and governance (ESG) and corporate social responsibility (CSR) considerations have begun increasingly to influence investment decision-making (Ahmad et al., 2024; A. Mansour et al., 2024). The trend is part of a general trend towards sustainable finance globally and is reflective of an increasing desire by Jordanian investors for socially responsible investments. The use of ESG considerations in investment decision-making is particularly appropriate in the framework of Jordan’s commitment to sustainable development as laid out in its National Green Growth Plan and in accordance with the United Nations Sustainable Development Goals (SDGs).

Accounting practices, most importantly those for ESG reporting, have led the way. Quality ESG disclosures can enable investors to distinguish a firm’s sustainability performance and long-run value-generating capability (Alqudah et al., 2024). For the most part, then, most Jordanian corporations, most notably listed corporations such as the Amman Stock Exchange (ASE), have begun implementing international standards such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) in order to promote comparability and credibility (Al Amosh et al., 2024). However, there are problems, most notably with SMEs, whose ESG disclosures are uneven and underdeveloped (Alghazzawi, 2025; Alshammari & Alkhwaldi, 2025; Bhat et al., 2024).

Nowadays, Jordanian institutional investors are recognizing the truth that ESG factors and, more precisely, governance factors such as boards’ independence, shareholders’ rights, and anti-corruption measures are the most significant determinants of long-run firm performance (Al Amosh et al., 2024). As for the Jordan Securities Commission (2022), over 20% of institutional investors have now made the ESG factors official as part of their investment strategies. Also, the presence of ESG-themed mutual funds in the country has increased by 15% over the past year, demonstrating a tangible transformation in the investors’ desire for sustainable investment.

Parallel with the growing relevance of ESG, CSR evolved from an outlying philanthropic agenda to a firm legitimacy-building, stakeholder trustworthiness, and market competitiveness tool. Jordanian businesses have pursued CSR initiatives in youth development, education, health, and the conservation of the environment. Not only are these aligned with the social development plans of the state, but more and more investors also see them as credible indicators of the long-term health of a firm (M. Mansour et al., 2024; Albuquerque et al., 2020). Theoretical underpinnings established that CSR enhances the reputation of the firm as well as mitigates information asymmetry, which impacts investor perceptions and perceptions of risk (Abdel Magid et al., 2023).

Interestingly, CSR is also said to perform a double task: It directly affects investor decision-making and moderates the relationship between ESG performance and investment. Those with good CSR practice are regarded as more credible in their ESG disclosures, adding to the perceived credibility of their sustainability performance. For instance, green CSR practices like reducing carbon footprint and efficient use of resources raise confidence among investors in a firm’s green commitment and management of risks. Similarly, CSR practices for the social domain (e.g., well-being of workers, engagement with the community, etc.) and governance procedures (e.g., ethical management, transparency towards the stakeholders, etc.) raise the level of investor confidence by transmitting signals of strong institutional accountability (Saivinod & Sivakumar, 2025; Gordon, 2022).

Despite such advancements, the Jordanian market still falls behind in the institutionalization of CSR and ESG practices, particularly in the standardization of ESG reporting and mainstreaming CSR in strategic frameworks. While regulatory bodies, including the Jordan Securities Commission and the Central Bank of Jordan, have issued guidelines for the facilitation of the promotion of ESG reporting (Abdullah & Haron, 2022), enforcement is poor. While larger businesses have progressed, SMEs and family businesses are also lagging in the embrace of both ESG as well as CSR. Such discrepancies hinder the evolution towards a completely well-informed and sustainability-oriented investment ecosystem.

Generally, the emerging Jordanian ESG and CSR landscape is an opportunity as well as a challenge. While on the one hand, institutional investors are increasingly looking after the materiality of non-financial information, demanding increased transparency and performance in sustainability, on the other hand, the quality inconsistency of ESG and CSR practices underscores the need for more regulation, education, and standardization. As the Jordanian capital market is increasingly adopting ESG and CSR as mainstream investment considerations, the role of accounting standards, investor ethics, and corporate transparency will increasingly be integrated with decision-making. The emerging landscape is timely and appropriate for the consideration of the moderating impact of CSR on the relationship between the ESG and investor decision-making.

2.2. ESG Disclosure and Investor Decision-Making

The incorporation of environmental, social, and governance (ESG) factors into investors’ decision-making models is progressively recognized as central in the field of sustainable finance (Tettamanzi et al., 2022). From a stakeholder theory perspective (Freeman, 1984), organizations that adopt proactive approaches in managing ESG issues demonstrate attentiveness to a wide range of stakeholders, such as employees, customers, regulators, and society at large. The degree of engagement reflects the organization’s commitment to creating long-term shared value, an element that investors recognize as an indicator of sustainable growth and reduced risk exposure (Coelho et al., 2023).

Spence’s (1973) theory of signaling explains the functionality of environmental, social, and governance (ESG) disclosures as reliable signals in information asymmetry markets. Strong ESG performance by companies signals their quality management, sound risk management practices, and ethical governance, which calms the fears of investors and adds firm value (Lah et al., 2025; Saleh et al., 2025; Mustafa, 2025). The mechanism enables the differentiation by investors between quality companies, thereby facilitating easier investment choices. Additionally, legitimacy theory (Suchman, 1995) stresses that companies strive to harmonize their actions with external expectations to maintain their legitimacy and their “license to operate.” Compliance with environmental, social, and governance (ESG) practices serves to legitimize the company’s position from the external stakeholders’ standpoint, including investors, who might view such harmony as a safeguard against regulatory fines, reputational damage, and business disruption (Friede et al., 2015).

Empirical evidence solidly supports the positive relationship between environmental, social, and governance (ESG) performance and financial performance, attesting that investors are inclined towards supporting companies that have strong ESG practices due to their perceived reduced risk and increased longer-term prospects (Nirino et al., 2021; Kim & Li, 2021). However, there are some inconclusive findings which indicate that contextual factors such as the level of market maturity and institutional quality might impact this relationship (Morri et al., 2024). In addition, the motivations for investors’ ESG inclusion are also very different, encompassing both economic motives looking for increased financial returns and ethical motivations based on human values (Starks, 2023). Such a duality captures the complicated and dynamic nature of ESG inclusion in investment decision-making. Additionally, the literature suggests that the effectiveness of ESG disclosures is strongly influenced by the robustness of the underlying accounting practices. Transparent, standardized reporting frameworks such as those offered by the Global Reporting Initiative (GRI) or the SASB can mediate the relationship between ESG performance and investor confidence by ensuring data integrity, comparability, and clarity (Coelho et al., 2023; Tettamanzi et al., 2022).

Based on these theories, this study hypothesizes the following:

H1a: 

Environmental performance has a direct positive impact on investor decision-making.

H1b: 

Social performance has a direct positive impact on investor decision-making.

H1c: 

Governance performance has a direct positive impact on investor decision-making.

2.3. Moderating Role of Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a voluntary action by a firm to do business in an ethical and sustainable way, contributing positively to society and the environment above economic interests (Barauskaite & Streimikiene, 2021). CSR activities include a vast array of actions like conservation of the environment, community development, welfare activities for the workers, and ethical conduct of businesses. CSR underwent the transition in the past few years from a voluntary charitable activity to a strategic imperative which the businesses adopt for the achievement of competitive edge, capitalization of reputations, and conformity with altered society expectations (Ben-Amar et al., 2025; Morri et al., 2024). According to the stakeholder theory perspective (Freeman, 1984), CSR plays a central role in the discharge of a firm’s obligation towards different groups of stakeholders. Through the proactive action of attending to the problems of the stakeholders through CSR interventions, businesses signify their regard for social and environmental guardianship, most critical for the establishment of the trust and loyalty of the stakeholders. Increased stakeholder involvement, particularly with the investor base, results in positive investor sentiments, firm assurance, and trustworthiness. CSR, therefore, is said to influence the process of investment decision-making directly by making it clearly visible that the firm is interested in broader society and environmental concerns alongside financial performance.

This direct impact of CSR on investors is also accounted for by the theory of signaling (Spence, 1973), which views CSR disclosures as credible signals reducing information asymmetry between investors and firms. Investors are typically faced with ignorance of actual sustainability practices by firms; thus, comprehensively defined and credible CSR activities are good signals of a firm’s quality management, ethical values, and proactive handling of risks. According to Gordon (2022), CSR activities symbolize corporate resilience and adaptability in the handling of green and social problems, values which are extremely coveted by investors in an increasingly sophisticated and regulated marketplace setting. Legitimacy theory (Suchman, 1995) also substantiates the argument that CSR plays a critical part in maintaining and renewing a firm’s social license to operate. CSR activities signify that the firm is harmonizing its businesses with prevailing norms and values in society, hence securing its legitimacy and reducing the probability of backlash from stakeholders or regulation. To investors, legitimacy translates to reduced operational and reputation risks, which directly help inform their investment decisions.

Beyond the direct impact, corporate social responsibility (CSR) is supposed to moderate the relationship between environmental, social, and governance (ESG) and investor decision-making. CSR activities are supposed to increase the influence of environmental, social, and governance performance on investors by increasing the credibility and perceived authenticity of ESG disclosures. For example, in the environmental domain, when companies integrate CSR initiatives such as carbon footprint reduction, waste management, and sustainable resource utilization, they reinforce the signal that their environmental practices are real and aligned with global sustainability goals. Therefore, CSR engagement increases investor confidence in the company’s ability to seize green opportunities and manage environmental risks and therefore strengthens the relationship between environmental performance and investor decisions.

In the social domain, CSR activities for worker welfare, community enhancement, and human rights exhibit a firm’s orientation towards social responsibility over compliance. Such compatibility articulates investor perceptions that the firm is engaged with addressing the social risks and developing long-run stakeholder allegiance and social capital. CSR is consequently anticipated to enhance the positive effect of social performance on investor decisions. In the governance domain, CSR activities for transparency, ethical management, and stakeholder engagement communicate effective corporate governance and accountability. Through the alleviation of managerial opportunism concerns and governance failures, such CSR activities increase investor confidence and trust and hence form the governance performance-investor decision relationship. Empirical evidence confirms this moderator effect of CSR, which proves that it acts as a critical channel through which investors perceive and respond to ESG information (Albuquerque et al., 2020; Saivinod & Sivakumar, 2025). However, the effect of CSR as a moderator is reliant to a great extent on the perceived sincerity and integrated implementation of CSR activities. Sincere and integrated CSR implemented as an intrinsic part of a firm’s culture and sustainability approach heightens the sense of investor awareness and sensitization towards ESG performance, whereas representative or superficial CSR activities might erode such linkages.

In parallel with the moderating role of CSR, it is important to recognize the foundational role of accounting in facilitating ESG disclosure. Without reliable, standardized accounting practices, ESG and CSR information may lack credibility or comparability. Accounting frameworks such as those developed by GRI and SASB help reduce information asymmetry and enhance the authenticity of ESG data, thereby reinforcing the impact of CSR and ESG initiatives on investor decision-making. This mediating role of accounting is especially relevant in emerging economies like Jordan, where transparency and trust in sustainability disclosures are still evolving.

Collectively, both theoretical and empirical evidence exists for the argument that not only does CSR exert an independent impact on investor decision making but also a conditional impact by shaping investors’ perceptions about the firm’s environmental, social, and governance performance. The following hypotheses are therefore proposed in this research:

H2a: 

CSR moderates the relationship between environmental performance and investor decision-making.

H2b: 

CSR moderates the relationship between social performance and investor decision-making.

H2c: 

CSR moderates the relationship between governance performance and investor decision-making.

3. Data Collection and Sample Characteristics

3.1. Research Design

This study adopts a quantitative research design in studying the interactions of investor decision-making behavior, corporate social responsibility (CSR) leadership, and knowledge of environmental, social, and governance (ESG). The objective is to establish the degree to which the variables affect organizational decision-making at the strategic level and whether the search for information is moderating. This research draws from three existing frameworks: Gill et al. (2018) for decision-making and information search, Du Preez and Van Zyl (2015) for CSR leadership, and Kucęba (2024) for knowledge of ESG. Empirical evidence was gathered through a survey-based approach to test the hypotheses statistically via the use of Structural Equation Modeling (SEM) since it can identify complex interactions and direct as well as indirect impacts and is thus very appropriate when both organizational and behavioral constructs are under investigation.

3.2. Population and Sample Selection

The targeted population is organizations from Jordan’s financial, industrial, and service sectors with a specific emphasis on organizations with sustainability practices, strategic investments, and CSR initiatives. The participant respondents are professional experts who are investment analysts, sustainability officers, CSR managers, and ultimate decision-makers. The target population includes institutional investors and analysts evaluating the ESG performance of publicly listed or large-cap firms in Jordan.

The sampling method used is stratified random sampling to ensure representation from various sectors and sizes of organizations. The generalizability and soundness of the research findings are boosted. According to the SEM guideline of J. F. Hair et al. (2020), this research targeted 200 to 400 responses for stable estimation and statistical power. This research obtained 350 valid responses, which is sufficient for SEM analysis and hypothesis testing.

3.3. Measurement of Variables

The operational definition of a positive impact on the investor decision-making is a rise in the behaviors that demonstrate ethical sensitivity, long-term value-orientation, and those matching with individual or social values. The operationalization of these behaviors is achieved by the use of the adapted measurement items, which are provided in Appendix A. The survey used a 5-point Likert scale (1 (“Strongly Disagree”) to 5 (“Strongly Agree”) to scale all survey questions. All the constructs were measured with pre-tested questions contextualized to the study setting. Data was collected by way of a structured questionnaire through the use of e-mail and direct organizational contact. The survey questionnaire was drawn from pre-tested measurement scales and contextualized to the Jordanian context of businesses for cultural adaptation. The data were collected through an online questionnaire administered between February and March 2024 using a convenience sampling approach targeting institutional investors and analysts operating in the Jordanian capital market.

Investor decision-making was assessed using four items adapted from Gill et al. (2018), which evaluate key behavioral and cognitive aspects that influence investment preferences. These items captured the extent to which investors

• Engage in a systematic information search before making decisions;
• Consider ethical and sustainability factors during evaluation;
• Priorities long-term value creation over short-term gains;
• Align investment choices with broader social and environmental values.

Each item was measured using a five-point Likert scale (1 = Strongly Disagree, 5 = Strongly Agree). The measurement instrument was pre-tested for internal consistency and validated through expert review. The complete set of items is provided in Appendix A.

CSR leadership was measured with three questions, which were originally framed by Du Preez and Van Zyl (2015) to measure ethical and responsible leadership dimensions in organizations. The construct ESG knowledge was measured with 13 questions grounded by Kucęba (2024) based on knowledge regarding sustainability reports, the environment, and awareness regarding governance in contemporary organizations.

To define CSR in the specific context of this research, this study introduced a three-item measure based on Du Preez and Van Zyl (2015) and adjusted it to Jordanian circumstances by the team of researchers. The measured adapted items refer to the ethical and responsible leadership and implementation as a proxy of the influence of CSR orientation in the organization in general. Even though CSR integrates the environmental, social, and community aspects, the leadership-focused scale was chosen as it is most relevant to the perceptions of investors in emerging industries like that of Jordan, where ethical leadership can be seen as an important indicator of CSR adherence.

The items measure the extent to which the leadership integrates CSR in the planning of strategies, making decisions, and the overall ethical culture of the organization. Supporting literature remarks that the tangible undertaking of leadership is considered by investors as the key predictor of genuine CSR (Ardiansyah & Alnoor, 2024; Abdel Magid et al., 2023).

The CSR components used in this study are summarized as follows:

• CSR in leadership is reflected in strategic planning activities;
• The leadership incorporates CSR issues into everyday decision-making activities;
• A leadership team also develops an ethical culture of the firm that gives emphasis to the principles of CSR.

The ESG dimensions were measured using subjective indicators that point out the awareness of investors about organizational performance in all aspects. The questions were borrowed, modified and applied to a Jordanian corporate environment.

Environmental dimension: the items measured how much the organizations adopt environmentally friendly methods and minimize the impact on the environment.

Social dimension: the items covered worker welfare, community involvement, and the relationships with the stakeholders.

Governance dimension: Items included transparency, anti-corruption, and shareholder rights.

In spite of the fact that the source was based on the term ESG, which actually meant the knowledge, the adaptation and translation made it interpretable as a performance-based evaluation. All of the ESG items can be found in Appendix A.

For measuring the knowledge of sustainability reports, 13 English questions utilized by Kucęba (2024) as the foundation were translated for linguistic accuracy as well as for the sake of comprehensibility by translating the questionnaire from English to Arabic and back to English by three bilingual experts. The final questionnaire was vetted by academics with a background in business and management and pilot-tested with 20 professionals for clarity, internal consistency, and face validity prior to large-scale administration.

3.4. Data Analysis Technique

The researchers examined the relationship between ESG and CPR and investors’ decision-making through Partial Least Squares Structural Equation Modeling (PLS-SEM) that was run on Smart PLS 4 for statistical analysis. The use of PLS-SEM as the research analysis technique was based on successful management of latent variables, as well as appropriateness for exploratory studies, as well as the ability to examine moderation impacts according to Alhasnawi et al. (2024) and Alzubi et al. (2025). The methodology models predictions and measures direct and indirect effects in business and management research according to J. Hair and Sarstedt (2020).

The evaluation process started by measuring the model and continued with testing the structural model as J. F. Hair et al. (2020) describe. A construct reliability assessment with a validity examination represented the vital elements for evaluating the measurement model. This study’s reliability assessment utilized Cronbach’s Alpha (α) together with composite reliability (CR) to show excellent internal consistency because both indicators exceeded 0.70 according to Fornell and Larcker’s (1981) standards. The measurement attained satisfactory 0.50 validity standards through average Variance Extracted analysis Alashqar et al. (2025). The research used both the Fornell–Larcker criterion alongside the HTMT ratio to verify the statistical independence of all constructs.

The model relationships received assessments from testing multicollinearity through the Variance Inflation Factor (VIF) analysis, where all values remained below 5.0. Bootstrapping with 5000 resamples served the hypothesis testing phase due to its ability to provide exact path coefficient measurements accompanied by levels of statistical significance, which follows J. F. Hair et al. (2014). This study employed variance accounted for (VAF) as a method to detect how CRP acted as complete or partial moderators between ESG and investors’ decision-making (Zhao et al., 2010; Ibrahim & Alzubi, 2024).

The basis for testing the model was based on its fit criteria, i.e., model adequacy tests. The Standardized Root Mean Square Residual assessment resulted to be a good way to evaluate the model fit due to the decreasing value below 0.08. The amount that NFI is evaluated is part of standard protocols for an assessment of fit quality at the model framework level. The Normed Fit Index (NFI) was 0.932, exceeding the 0.90 threshold and indicating acceptable model fit.

The model’s forecasting ability, coefficient of determination R-squared, was evaluated to determine the forecasting capability of the model, through which the model has been found to have a minimum of 0.25 for moderate explanation strength and 0.50 or higher for strong prediction strength. The performance of the model was statistically validated so that researchers could determine the relationships between ESG and investors’ decision-making.

4. Data Analysis and Results

4.1. Measurement Model Assessment

Table 1. Descriptive statistics of main constructs.

Construct	Mean	Std. Deviation	Minimum	Maximum
Environmental Performance	3.87	0.72	2.1	5
Social Performance	3.78	0.69	2	5
Governance Performance	3.65	0.76	1.8	5
CSR	3.91	0.68	2.2	5
Investor Decision-Making	3.83	0.71	2	5

Source: Authors’ own analysis.

shows all constructs’ internal consistency and convergent validity. Values of composite reliability and Cronbach’s alpha are above 0.70, which exceeds the recommended threshold for good internal consistency. Furthermore, all of the AVE values are greater than 0.50, which indicates that there exists a convergent validity for each construct.

The measurement model is illustrated in Figure 1 and demonstrates the connections between the latent constructs and their observed indicators. All item loadings exceed the recommended threshold of 0.60, confirming the reliability and convergent validity of the constructs used in the model. The structural model reveals that the Environmental dimension has the strongest direct effect on investor decision-making (β = 0.233), followed by social factors (β = 0.182). Interestingly, governance exerts a negative influence on investor decision-making (β = −0.121), indicating that increased governance concerns may deter investor behavior in the studied context. The mediating role of corporate social responsibility (CSR) appears weak, with minimal path coefficients linking ESG dimensions through CSR to investor decisions. The high R² value of 0.877 for investor decision-making indicates that the model explains a substantial portion of the variance, thus validating the robustness of the measurement model and its suitability for structural analysis.

The Heterotrait–Monotrait (HTMT) ratio values for the constructs in the model are presented in

Table 2. Convergent validity and internal consistency reliability.

	Cronbach’s Alpha	Composite Reliability (rho_a)	Composite Reliability (rho_c)	Average Variance Extracted (AVE)
Corporate Social Responsibility (CSR)	0.780	0.801	0.871	0.693
Environmental	0.814	0.837	0.877	0.642
Governance	0.818	0.829	0.881	0.650
Investors Decision-Making	0.777	0.812	0.854	0.595
Social	0.802	0.802	0.863	0.559

Source: Authors’ own analysis.

. For all constructs, all HTMT values are below the conservative threshold of 0.90; therefore, discriminant validity is established. The value of environmental with respect to social is relatively high (0.888) and is acceptable in the rang, but raises an issue in future studies, Henseler et al. (2015).

The Fornell–Larcker criterion evaluation for discriminant validity appears in

Table 3. Heterotrait–Monotrait Correlation (HTMT).

	1	2	3	4	5	6	7
1. Corporate Social Responsibility (CSR)
2. Environmental	0.831
3. Governance	0.774	0.809
4. Investors’ Decision-Making	0.717	0.802	0.833
5. Social	0.733	0.888	0.727	0.762
6. Corporate Social Responsibility (CSR) × Social	0.722	0.596	0.601	0.690	0.663
7. Corporate Social Responsibility (CSR) × Governance	0.756	0.644	0.630	0.728	0.629	0.706
8. Corporate Social Responsibility (CSR) × Environmental	0.765	0.715	0.599	0.701	0.582	0.837	0.708

Source: Authors’ own analysis.

. The italics in the diagonal cells show the square root of the Average Variance Extracted (AVE) for each construct, and these values must exceed other construct correlations to verify discriminant validity (Fornell & Larcker, 1981). The research findings show that each construct meets the Fornell–Larcker criterion, which proves the separate identity of variables from one another. The findings validate the measurement model design and the reliability of structural connections between constructs for later usage in structural model analysis.

4.2. Coefficient of Determination (R²) and Explained Variance of the Dependent Variable

The R-squared and adjusted R-squared values presented in

Table 4. Fornell and Larcker correlation.

	1	2	3	4	5
1. Corporate Social Responsibility (CSR)	0.843
2. Environmental	0.744	0.820
3. Governance	0.779	0.717	0.810
4. Investors’ Decision-Making	0.722	0.736	0.762	0.771
5. Social	0.737	0.719	0.703	0.760	0.765

Source: Authors’ own analysis.

indicate very strong explanatory power of the model in investor decision-making assessment. Specifically, the R-square of 0.877 indicates that the independent variables encompassed in the model, i.e., ESG performance and CSR moderating effect, explain 87.7% of the variance in investor decision-making. The adjusted R-squared value of 0.873, which adjusts for the number of predictors included in the model, also confirms the model’s strength and reduces the risk of overfitting.

These findings suggest a strong and meaningful relationship between ESG variables and investment decision-making and establish the relevance of CSR as a mediator for this relationship. The large R-squared measure confirms the argument that investors nowadays are considering a greater amount of non-financial information, including ESG performance, as part of their decision-making and especially when it goes alongside good CSR practices. This indicates the trend in sustainable finance whereby ethical, social, and environmental impacts of corporate behavior initiate the practice of ethically responsible investment.

The results reflect the necessity of companies embracing and reporting extensive CSR actions not merely as ethical imperatives but as strategic tools facilitating ESG disclosure transparency and legitimacy and, as a consequence, affecting investor sentiments and behaviors.

4.3. Structural Model Assessment

As shown in

Table 5. R-squared and R-squared adjusted.

	R-Square	R-Square Adjusted
Investors Decision-Making	0.877	0.873

Source: Authors’ own analysis.

, the empirical path coefficients and the coefficients’ associated statistical significance reflect the hypothesized relationships. The significance of the direct effects of corporate social responsibility, environmental, governance, and social dimensions upon investor decision-making is statistically significant, with CSR bearing the strongest positive effect (β = 0.674, p < 0.001). Only the CSR × governance interaction term is significant, with the coefficient equal to −0.125, while p < 0.05, implying a negative moderating effect. CSR has been found to be insignificant in its interactions with social and environmental dimensions.

Table 6. Result of hypotheses testing (path coefficients-β).

Hypotheses	Original Sample	Sample Mean (M)	Standard Deviation	T Statistics	p Values
Environmental -> Investors Decision-Making	0.233	0.228	0.077	3.010	0.003
Social -> Investors Decision-Making	0.182	0.178	0.053	3.419	0.001
Governance -> Investors Decision-Making	−0.121	−0.116	0.060	2.031	0.042
Corporate Social Responsibility (CSR) × Environmental -> Investors’ Decision-Making	0.083	0.082	0.053	1.556	0.120
Corporate Social Responsibility (CSR) × Social -> Investors’ Decision-Making	0.024	0.019	0.039	0.620	0.536
Corporate Social Responsibility (CSR) × Governance -> Investors’ Decision-Making	−0.125	−0.126	0.057	2.214	0.027

Source: Authors’ own analysis.

summarizes the hypothesis testing results. H1 and H2 were supported, while H3 (governance → decision-making) showed a negative effect. Moderation hypotheses H4–H6 (CSR × ESG dimensions) were not significant.

Figure 2 presents findings from the test of ESG’s direct and moderated effects on investor decision-making and the moderator variable corporate social responsibility (CSR). The model accounts for a high percentage of variance in investor decision-making (R² = 0.877), reflecting the high predictive strength of ESG issues and CSR combined. The most significant of the direct effects are governance (0.042), followed by environmental (0.003) and social (0.001) variables. Although the social and environmental coefficients are weak, they at least both happen to be positive and thus signal a marginal impact on investor perceptions. The most powerful of the direct routes through to investor decision-making comes from CSR itself (not shown on the figure but deduced from the R² and abstract results), demonstrating the strategic value of CSR on investor decision-making. The moderating roles of CSR are not as clear-cut. The governance and CSR interaction term (0.027) is statistically significant, but the sign and magnitude of this effect indicate the relationship can be complex, possibly explaining that where governance structures are less suited for CSR ideals, investors see a lack of consistency or risk. This also aligns with the above findings wherein governance has a negative effect on investor decision-making, potentially explaining mistrust or inconsistent disclosure in the culture of an emerging country like Jordan. On the other hand, moderating channel CSR and environmental (0.120) and CSR and social (0.536) do not hold any statistical significance, reflecting that CSR has not enhanced the impact of those two ESG components on investor decision-making. These results imply that the function of CSR is not the same for all ESG elements but rather interacts selectively with governance and has the capacity either to enhance or destroy investor trust based on whether governance practices align and match CSR communication or not.

5. Discussion

The empirical evidence from this research supports the growing importance of environmental, social, and governance (ESG) and corporate social responsibility (CSR) for investor decision-making in the Jordanian setting. The findings highlight that social and environmental performance have a positive influence on investor decision-making, while governance performance records a surprising negative relationship. The evidence supports the extant evidence that institutional investors are increasingly integrating ESG considerations in their policies as they become increasingly attuned to long-term sustainability risks and opportunities (Morri et al., 2024; Ahmad et al., 2024).

The priority of CSR as a direct motivator is a testament to the increasing call by institutional investors for transparency, ethics, and sustainable corporate behavior. This would be aligned with stakeholder theory, that corporations not only owe a commitment to shareholders but also a commitment to a broader set of stakeholders, like employees, customers, communities, and investors. Investors would apparently reward organizations that are perceived to be genuinely committed to broader societal goals since CSR activities can send out messages of long-term sustainability, reduced risk, and ethical compatibility (Ardiansyah & Alnoor, 2024; Abdel Magid et al., 2023). Precisely, CSR has been linked with investor perceptions of corporate stability and commitment to quality governance (Du Preez & Van Zyl, 2015; Ernst et al., 2025).

The positive impact of the social and environmental factor is supported by current literature that indicates that companies taking care of climate change, community, and employee health can draw greater investor attention (Friede et al., 2015; Nirino et al., 2021; Kim & Li, 2021). The impact is more pronounced in the Jordanian environment, with the demand for products like ESG-themed mutual fund products increasing exponentially in the last few years. Environmental considerations are especially top-of-mind in a geography that is in the throes of climatic issues, and companies that make deliberate efforts to solve such issues are even more attractive to environmentally aware investors (Tettamanzi et al., 2022).

However, the negative relationship between governance and investor decision-making here is contrary to expectation and shows that investors in Jordan could interpret further governance control as a sign of intrinsic risk or instability. This would be because the overall quality of governance disclosures by businesses throughout the region, and particularly SMEs, is substantially mixed, per Al Amosh et al. (2024) and Alghazzawi (2025). It might also be an example of a universal issue with emerging markets, with governance frameworks continuing to evolve, and transparency, perhaps sometimes put in place reactively rather than proactively. As a result, governance disclosures might be misinterpreted by investors as red flags rather than as indicators of robustness.

Interestingly, the moderating effect of CSR only materialized under interaction with governance, namely, when it had a negative effect, with interaction with the social and the environmental dimensions not proving to be statistically significant. This would then further suggest that CSR does not necessarily strengthen the effect of the ESG dimensions but can water down or distort perceptions depending on the compatibility of CSR with a given set of ESG dimensions as well as the expectations of investors. When CSR practices are perceived as incongruent with governance practice or as not being credible, it might inadvertently erode trust, with the argument made by Albuquerque et al. (2020) that CSR must be consonant with governance arrangements for it to strengthen and not undermine investor trust.

These findings highlight the multidimensional, contextual nature of the relationship between ESG factors, CSR practices, and investor attitudes. Investors do appear to value authenticity, consistency, and coherence between corporate sustainability reports and firm practices. Tokenism or inconsistencies are not only likely not to elicit positive investor attitudes but can be an indication of impending difficulties with purposeful strategies and risk management (Escrig-Olmedo et al., 2017).

Additionally, the strong investor decision-making R² (0.877) shows the model’s explanatory power and robustness. The discovery signifies that combined, the ESG and CSR variables explain a considerable amount of the variance in investor actions. The inclusion of accounting practice, namely the presence of open ESG disclosures, in the studies signifies the evolution of accounting’s purpose in sustainable finance. With investors increasingly making investment choices based more frequently on non-financial disclosures, demands for precise, standardized ESG reporting sharply increase (Dasinapa, 2024; Arvidsson & Dumay, 2022). Accounting is therefore no longer the exclusive domain of financial performance measurement alone anymore; accounting now plays a vital purpose in revealing a firm’s sustainability profile, reputational damage control, and capital flows in sustainability-themed markets.

6. Conclusions and Implications for Research and Practice

6.1. Conclusions

In conclusion, this study demonstrates the powerful effect of ESG and CSR factors in making investment decisions, especially within the Jordanian investment setting. The findings validate the direct effect of CSR and identify the importance of environmentally and socially oriented considerations as determinants. The findings confirm the empirical relevance of stakeholder theory that the firm is best when it is acting in the interest of, and serving the interests of, a large number of constituencies, including environmentally and socially oriented interested parties. The adverse effect of governance is worthy of further research, including also the reception of governance disclosures in less developed sustainability reporting regimes.

The selective and partial moderating function of CSR, i.e., its negative interaction with governance, suggests that CSR is not always an unconditional multiplier of ESG’s effect. Instead, its effect is contingent upon coherence, perception, and the existence of a stakeholder interpretive frame. Hence, organizations need to make sure that their CSR initiatives are not just highly publicized but also aligned with overall sustainability frameworks. Disjointed or symbolic CSR initiatives can be an obstacle to the very trust that they are supposed to create.

In terms of action recommendations, companies are encouraged to craft strong CSR programs with concrete links to environmental and societal priorities. Internal control procedures need to be strengthened as well as disclosed to avoid negative inferences and facilitate investor trust-building in the long term. Policymakers need to periodically revise the ESG reporting framework to increase the quality and uniformity of the disclosures for companies of different sizes. Academic researchers are encouraged to perform comparative as well as longitudinal studies to determine future directions of the impact of ESG and CSR across geographies and industries. Lastly, investment institutions need to prioritize ESG-related training and education in order to make their professionals competent in critically assessing non-financial reporting disclosures.

Ultimately, the growing relevance of ESG and CSR in shaping investment behavior reflects a broader transition toward sustainable capitalism. These factors are no longer optional—they are becoming central determinants of risk, performance, and ethical alignment in the investment process. By embracing and strategically managing ESG and CSR components, companies and investors alike can contribute to a more sustainable and resilient economic future.

6.2. Research Implications

This study presents several implications for both academic research and practical application. From a research perspective, the integration of stakeholder theory into the ESG and CSR discourse enriches our theoretical understanding of investor behavior. The finding that CSR exerts the most influence and moderates governance in a negative manner suggests that future studies should investigate the conditions under which CSR strengthens or weakens ESG effects. There is a clear need to explore contextual variables, such as cultural expectations, regulatory frameworks, and market maturity, which might shape investor interpretations of sustainability disclosures. Moreover, the unexpected negative impact of governance offers a rich avenue for future research into how governance transparency is perceived in emerging markets like Jordan. Further studies could adopt qualitative approaches to better understand investor perceptions and trust dynamics in relation to governance structures.

In practical terms, this research is critical for companies, investors, regulators, as well as accounting professionals. Companies must consider CSR to be something more than a policy obligation or marketing stunt but as a component of reputation enhancement and investor relations. CSR activities backed by a well-thought-out strategy with an ESG objective can make a company more investor-friendly. Investors, in their turn, are encouraged to sift through surface-level ESG ratings and consider the sincerity and consistency with which a company approaches CSR and ESG embedding.

Of particular importance for SMEs, Jordanian and peer regulators are encouraged to promote standardization of ESG reporting, as the quality of the reports is more variable. Prescriptive regulation and the application of international standards such as those provided by the Global Reporting Initiative (GRI) or Sustainability Accounting Standards Board (SASB) can increase the level of comparability and the quality of decision-making. Finally, ESG assurance and sustainability reporting are spaces in which accounting professionals must expand their capabilities. The profession’s new challenge to convert sustainability performance into credible, measurable information positions accountants at the heart of responsible investment ecosystems.

6.3. Limitations and Directions for Future Research

In spite of the useful findings of this research when referring to the determinants of ESG-oriented investment decisions within the context of Jordanian markets, a number of methodological limitations need to be mentioned.

First, the analysis is based on the unvalidated and subjective assessment of the perceived ESG performance, but it fails to combine objective data (third-party ratings or objective sustainability reports, audited by independent parties). Future research will benefit by triangulating these judgmental proxies with quantitative, independent scales in order to strengthen the validity of results.

Second, it should be noted that, even though the applied theoretical framework emphasizes accounting practices, the mentioned variables were not explicitly operationalized. The future research can clarify their mediation or moderation of investor behavior by conducting empirical research on ESG assurance, disclosure quality, or standard involvement, such as GRI and SASB.

Third, causality cannot be determined because of the usage of cross-sectional survey data. The dynamic nature of changes in the perceptions of ESG and CSR and the resulting effects on investor decision-making in different market scenarios would be brought to light by longitudinal designs, or rather, preferred experimental manipulations.

Finally, since institutional investors and equity analysts in the context of Jordan were emphasized, the external validity of the findings can be limited. To approach and study a wider range of individuals (retail or populations) in other similar economies in the so-called emerging world would give more comparative value.