Corporate Controversies and Market-to-Book: The Moderating Role of ESG Practices


Corporate controversies

How to Cite

Keidann Soschinski, C., Mazzioni, S., Baú Dal Magro’, C., & Leite, M. (2024). Corporate Controversies and Market-to-Book: The Moderating Role of ESG Practices. Review of Business Management, 26(01).


Purpose – The aim of this study is to analyze the moderating role of ESG practices in the relationship between corporate controversies and companies’ market-tobook performance.

Theoretical framework – ESG effect, ESG controversies and market performance.

Design/methodology/approach – We investigated 3,267 companies from 20 countries with the highest GDP in 2021. ESG ratings and other variables were collected from the Refinitiv database. The cross-country analysis considered panel data regressions with fixed effects by year, industry and country from 2016 to 2020.

Findings – The results showed that corporate controversies have a negative effect on companies’ market performance, while engagement in ESG practices has a positive effect. However, when analyzing the relationship between corporate controversies and market-to-book value in companies with high ESG ratings, the negative effect of controversies is not significant.

Practical & social implications of research – This research contributes by indicating the negative consequences of corporate controversies in terms of market performance and signaling that ESG practices are important to meet the needs
of stakeholders, but are not enough to mitigate the impact of ESG controversies on market performance.

Originality/value – To the best of our knowledge, this is the first paper to demonstrate that ESG practices are not strong enough to mitigate the negative effects of ESG controversies on market performance in a large sample.

Keywords: Corporate controversies, ESG, market-to-book.


Aboud, A., & Diab, A. (2018). The impact of social, environmental and corporate governance disclosures on firm value: Evidence from Egypt. Journal of Accounting in Emerging Economies, 8(4), 442-458. http://dx.doi. org/10.1108/JAEE-08-2017-0079.

Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836-863.

Alakent, E., & Ozer, M. (2014). Can companies buy legitimacy? Using corporate political strategies to offset negative corporate social responsibility records. Journal of Strategy and Management, 7(4), 318-336. http://dx.doi. org/10.1108/JSMA-04-2013-0028.

Antoncic, M., Bekaert, G., Rothenberg, R. V., & Noguer, M. (2020). Sustainable Investment-Exploring the Linkage between Alpha, ESG, and SDGs. (August 2020). http://

Bofinger, Y., Heyden, K. J., & Rock, B. (2022). Corporate social responsibility and market efficiency: Evidence from ESG and misvaluation measures. Journal of Banking & Finance, 134, 106322. jbankfin.2021.106322.

Brinette, S., Sonmez, F. D., & Tournus, P. S. (2023). ESG controversies and firm value: Moderating role of board gender diversity and board independence. In IEEE Transactions on Engineering Management (pp. 4298-4307) Piscataway: IEEE.

Brooks, C., & Oikonomou, I. (2018). The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in 15 R. Bras. Gest. Neg., São Paulo, v.26, n.1, e20230115, 2024 Corporate Controversies and Market-to-Book: The Moderating Role of ESG Practices accounting and finance. The British Accounting Review, 50(1), 1-15.

Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4(4), 497-505.

Chantziaras, A., Dedoulis, E., Grougiou, V., & Leventis, S. (2020). The impact of religiosity and corruption on CSR reporting: The case of US banks. Journal of Business Research, 109, 362-374. jbusres.2019.12.025.

Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of Environmental Management, 345, 118829. PMid:37688968.

Chollet, P., & Sandwidi, B. W. (2018). CSR engagement and financial risk: A virtuous circle? International evidence. Global Finance Journal, 38, 65-81. http://dx.doi. org/10.1016/j.gfj.2018.03.004.

DasGupta, R., & Roy, A. (2023). Moderation impact of national culture on international firm’s environmental, social, governance and financial performance. International Journal of Intercultural Relations, 92, 101749. http://

De La Fuente, G., Ortiz, M., & Velasco, P. (2022). The value of a firm’s engagement in ESG practices: Are we looking at the right side? Long Range Planning, 55(4), 102143.

Dorfleitner, G., Pons, D., & Renier, N. (2023). 14. An investor’s perspective on measuring and managing social performance and impact. In V. Hartarska and R. J. Cull (Eds.), Handbook of microfinance, financial inclusion and development (pp. 248–270). Cheltenham: Edward Elgar Publishing. 4.00022.

Eliwa, Y., Aboud, A., & Saleh, A. (2021). ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting, 79, 102097. http://dx.doi. org/10.1016/

Fatemi, A., Glaum, M., & Kaiser, S. (2018). ESG performance and firm value: The moderating role of disclosure. Global Finance Journal, 38, 45-64. http://

Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.. http://dx.doi. org/10.1017/CBO9781139192675.

Freeman, R. E., & McVea, J. (2001). A stakeholder approach to strategic management. In M. A. Hitt, R. E. Freeman, J. S. Harrison (Eds.), The blackwell handbook of strategic management (pp. 183-201). Oxford: Blackwell. Gangi, F., Mustilli, M., & Varrone, N. (2019). The impact of corporate social responsibility (CSR) knowledge on corporate financial performance: Evidence from the European banking industry. Journal of Knowledge Management, 23(1), 110-134. JKM-04-2018-0267.

Garcia, A., Mendes-da-Silva, W., & Orsato, R. J. (2017). Sensitive industries produce better ESG performance: Evidence from emerging markets. Journal of Cleaner Production, 150, 135-147. jclepro.2017.02.180.

Gillan, S. L. (2006). Recent developments in corporate governance: An overview. Journal of Corporate Finance, 12(1), 381-402.

Grassmann, M. (2021). The relationship between corporate social responsibility expenditures and firm value: The moderating role of integrated reporting. Journal of Cleaner Production, 285, 124840. jclepro.2020.124840.

Hyz, A. B., & Sahinidis, A. (2018). Stakeholder prioritizing in the midst of an economic crisis: A multi-firm, multi-sector study. Central European Review of Economics & Finance, 26(4), 5-24.

Janney, J. J., & Gove, S. (2011). Reputation and corporate social responsibility aberrations, trends, and hypocrisy: Reactions to firm choices in the stock option backdating scandal. Journal of Management Studies, 48(7), 1562-1585.

Jasinenko, A., Christandl, F., & Meynhardt, T. (2020). Justified by ideology: Why conservatives care less about corporate social irresponsibility. Journal of Business Research, 114, 290-303. jbusres.2020.04.006.

R. Bras. Gest. Neg., São Paulo, v.26, n.1, e20230115, 2024 Caroline Keidann Soschinski / Sady Mazzioni / Cristian Baú Dal Magro / Maurício Leite Kang, J., & Kim, Y. H. (2014). The impact of media on corporate social responsibility (December 26, 2014).

Kim, K. H., Kim, M., & Qian, C. (2018). Effects of corporate social responsibility on corporate financial performance: A competitive-action perspective. Journal of Management, 44(3), 1097-1118. http://dx.doi. org/10.1177/0149206315602530.

Klein, J., & Dawar, N. (2004). Corporate social responsibility and consumers’ attributions and brand evaluations in a product–harm crisis. International Journal of Research in Marketing, 21(3), 203-217. ijresmar.2003.12.003.

Kraus, S., Rehman, S. U., & García, F. J. S. (2020). Corporate social responsibility and environmental performance: The mediating role of environmental strategy and green innovation. Technological Forecasting and Social Change, 160, 120262. techfore.2020.120262.

Krüger, P. (2014). Corporate goodness and shareholder wealth. Journal of Financial Economics, 115(2), 304-329.

La Rosa, F., & Bernini, F. (2022). ESG controversies and the cost of equity capital of European listed companies: The moderating effects of ESG performance and market securities regulation. International Journal of Accounting & Information Management, 30(5), 641-663. http://dx.doi. org/10.1108/IJAIM-03-2022-0047.

Li, J., Haider, Z. A., Jin, X., & Yuan, W. (2019). Corporate controversy, social responsibility and market performance: International evidence. Journal of International Financial Markets, Institutions and Money, 60, 1-18. http://dx.doi. org/10.1016/j.intfin.2018.11.013.

Liu, M. T., Wong, I. A., Shi, G., Chu, R., & L. Brock, J. ((2014). The impact of corporate social responsibility (CSR) performance and perceived brand quality on customer-based brand preference. Journal of Services Marketing, 28(3), 181-194. JSM-09-2012-0171.

Luo, W., Guo, X., Zhong, S., & Wang, J. (2019). Environmental information disclosure quality, media attention and debt financing costs: Evidence from Chinese heavy polluting listed companies. Journal of Cleaner Production, 231, 268-277. jclepro.2019.05.237.

Martín-de Castro, G. (2021). Exploring the market side of corporate environmentalism: Reputation, legitimacy and stakeholders’ engagement. Industrial Marketing Management, 92(1), 289-294. indmarman.2020.05.010.

Mascena, K. M. C. D., Fischmann, A. A., & Boaventura, J. M. G. (2018). Stakeholder prioritization in Brazilian companies disclosing GRI reports. BBR. Brazilian Business Review, 15(1), 17-32. bbr.2018.15.1.2.

Melinda, A., & Wardhani, R. (2020). The effect of environmental, social, governance, and controversies on firms’ value: Evidence from Asia. In International Symposia in Economic Theory and Econometrics (pp. 147-173). Leeds: Emerald Publishing. Nelling, E., & Webb, E. (2009). Corporate social responsibility and financial performance: The “virtuous circle” revisited. Review of Quantitative Finance and Accounting, 32(2), 197-209. s11156-008-0090-y.

Nirino, N., Santoro, G., Miglietta, N., & Quaglia, R. (2021). Corporate controversies and company’s financial performance: Exploring the moderating role of ESG practices. Technological Forecasting and Social Change, 162, 120341.

Orlitzky, M. (2013). Corporate social responsibility, noise, and stock market volatility. The Academy of Management Perspectives, 27(3), 238-254. amp.2012.0097.

Palupi, A. (2023). Does ESG affect the firm value? Accounting & Finance Review, 7(4), 19-26. http://dx.doi. org/10.35609/afr.2023.7.4(3).

Park, J., Lee, H., & Kim, C. (2014). Corporate social responsibilities, consumer trust and corporate reputation: South Korean consumers’ perspectives. Journal of Business Research, 67(3), 295-302. jbusres.2013.05.016.

Passas, I., Ragazou, K., Zafeiriou, E., Garefalakis, A., & Zopounidis, C. (2022). ESG controversies: A quantitative and qualitative analysis for the sociopolitical determinants 17 R. Bras. Gest. Neg., São Paulo, v.26, n.1, e20230115, 2024 Corporate Controversies and Market-to-Book: The Moderating Role of ESG Practices in EU firms. Sustainability (Basel), 14(19), 12879. http://

Porter, M. E., & Kramer, M. R. (2006). The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78-92, 163. PMid:17183795. Qureshi, M. A., Akbar, M., Akbar, A., & Poulova, P. (2021). Do ESG endeavors assist firms in achieving superior financial performance? A case of 100 best corporate citizens. SAGE Open, 11(2). http://dx.doi. org/10.1177/21582440211021598.

Refinitiv Eikon. (2022). ESG Scores. https://www.refinitiv. com/pt/sustainable-finance/esg-scores Rettab,

B., Brik, A. B., & Mellahi, K. (2009). A study of management perceptions of the impact of corporate social responsibility on organizational performance in emerging economies: The case of Dubai. Journal of Business Ethics, 89(3), 371-390. 0005-9.

Sánchez-Infante Hernández, J. P., Yañez-Araque, B., & Moreno-García, J. (2020). Moderating effect of firm size on the influence of corporate social responsibility in the economic performance of micro-, small-and medium-sized enterprises. Technological Forecasting and Social Change, 151, 119774. techfore.2019.119774.

Shin, J., Moon, J. J., & Kang, J. (2022). Where does ESG pay? The role of national culture in moderating the relationship between ESG performance and financial performance. International Business Review, 32(3), 102071.

Shobhwani, K., & Lodha, S. (2023). Impact of ESG risk scores on firm performance: An empirical analysis of NSE-100 companies. Asia-Pacific Journal of Management Research and Innovation, 19(1), 7-18. http://dx.doi. org/10.1177/2319510X231170910.

Uyar, A., Karaman, A. S., & Kilic, M. (2020). Is corporate social responsibility reporting a tool of signaling or greenwashing? Evidence from the worldwide logistics sector. Journal of Cleaner Production, 253, 119997. http://

Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169-178. http://

Wang, Z., & Sarkis, J. (2017). Corporate social responsibility governance, outcomes, and financial performance. Journal of Cleaner Production, 162, 1607-1616. http://dx.doi. org/10.1016/j.jclepro.2017.06.142.

Wong, J. B., & Zhang, Q. (2022). Stock market reactions to adverse ESG disclosure via media channels. The British Accounting Review, 54(1), 101045. http://dx.doi. org/10.1016/

Wu, C. M., & Hu, J. L. (2019). Can CSR reduce stock price crash risk? Evidence from China’s energy industry. Energy Policy, 128, 505-518. enpol.2019.01.026.

Ye, L., & Hu, H. W. (2022). Investor reactions to corporate misconduct: The moderating role of firm reputation. Proceedings - Academy of Management, 22(1), 11899.

Yu, E. P. Y., Guo, C. Q., & Luu, B. V. (2018). Environmental, social and governance transparency and firm value. Business Strategy and the Environment, 27(7), 987-1004. http://

Yuan, X., Li, Z., Xu, J., & Shang, L. (2022). ESG disclosure and corporate financial irregularities: Evidence from Chinese listed firms. Journal of Cleaner Production, 332, 129992.

If a paper is approved for publication, its copyright has to be transferred by the author(s) to the Review of Business Management – RBGN.

Accordingly, authors are REQUIRED to send RBGN a duly completed and signed Copyright Transfer Form. Please refer to the following template: [Copyright Transfer]

The conditions set out by the Copyright Transfer Form state that the Review of Business Management – RBGN owns, free of charge and permanently, the copyright of the papers it publishes. Although the authors are required to sign the Copyright Transfer Form, RBGN allows authors to hold and use their own copyright without restrictions.

The texts published by RBGN are the sole responsibility of their authors.

The review has adopted the CC-BY Creative Commons Attribution 4.0 allowing redistribution and reuse of papers on condition that the authorship is properly credited.