Role of Corporate Governance Awareness in Shaping Investment Behaviour: A Mediation Analysis

Abstract

With investor knowledge serving as a mediator, this research aims to comprehend the effect of corporate governance policies on investment choices. Financial reporting, auditing standards, disclosure procedures, and the board of directors' responsibilities are all parts of corporate governance that have an impact on investment choices. Firms' ESG information is vital in their financing choices, which further emphasizes the necessity for strong governance structures in light of the growing importance of ESG aspects. This research examines the characteristics impacting the investing behavior of 385 individual investors, chosen by purposive selection. A systematic online questionnaire was circulated using Google Forms to gather the main data. Respondents' knowledge of corporate governance procedures, views on ESG considerations, and methods of decision-making were all recorded in the questionnaire. The correlations between corporate governance procedures, degrees of awareness, and investment choices were investigated by using Structural Equation Modeling (SEM) in conjunction with regression data analysis. According to the results, investor knowledge mediates the relationship between corporate governance procedures and financial investment choices. To be more specific, investors' faith in investment options grows, their sense of investment risk diminishes, and they make better, more educated choices as they learn more about governance processes. Findings from this research stress the need of openness, board supervision, and thorough disclosure in attracting investors. In order to attract knowledgeable investors and promote long-term market development, these evident results highlight the need of realistic governance norms and investor education