The Determinants of Retail Investors' Intention to Invest in Environmental Social Governance Stocks in Malaysia

Abstract

Environmental, Social, and Governance (ESG) investing has become a global priority for sustainable finance, yet its determinants remain insufficiently examined in developing economies like Malaysia. While ESG disclosure is mandated by regulatory frameworks, investor participation remains low. This study addresses critical challenges such as the persistent “Disclosure Gap”, where companies fail to provide adequate data and the “Estimation Gap”, where investors rely on assumptions due to inconsistent reporting. These issues undermine investor confidence and contribute to slower growth in ESG stocks. The research objectives are threefold: examining the direct effects of individual and organisational factors on ESG investment intention, assessing the mediating effect of perceived corporate governance, and establishing a predictive behavioural framework. Guided by Self-Determination Theory (SDT), which emphasizes intrinsic motivation, autonomy, and perceived competence, this research investigates five key determinants: tacit knowledge, environmental concern, personal agency, opportunistic behaviour, and institutional trust. The study also explores how perceived corporate governance acts as a critical organisational-level mediator. Empirical findings reveal that tacit knowledge, environmental concern, personal agency, and institutional trust significantly enhance intentions to invest in ESG stocks, whereas opportunistic behaviour exerts a negative influence. Perceived corporate governance demonstrates a strong mediating effect, underscoring the importance of transparency, accountability, and ethical oversight. Theoretically, this study extends SDT into sustainable finance by integrating psychological, social, and governance dimensions. Practically, it provides evidence-based insights for policymakers and financial institutions to strengthen ESG adoption. By bridging gaps in Malaysia’s landscape, this research supports sustainable economic growth and enriches global discourse on developing global emerging markets.