Advances in Consumer Research
Issue 7 : 29-33
Original Article
Impact of ESG Controversy Score on Firm Financial Performance: An Empirical Analysis
 ,
1
Research Scholar, School of Business Studies, Sharda University Delhi NCR,
2
Associate Professor, School of business studies, Sharda University Delhi NCR.
Abstract

This paper examines the relationship between a firm's ESG controversy score and its financial performance. ESG controversies are negative, publicly reported events relating to a company's environmental, social, or governance conduct, and rating agencies such as LSEG (formerly Refinitiv) convert these events into a numerical controversy score that is used by investors alongside standard ESG ratings. The paper builds a conceptual model linking controversy exposure to profitability, market valuation, and firm risk, and develops testable hypotheses grounded in stakeholder theory, legitimacy theory, and risk management theory. Because primary access to proprietary ESG controversy databases (LSEG, Refinitiv, Bloomberg) was not available for this exercise, the empirical section takes the form of a structured synthesis of quantitative findings reported in peer-reviewed studies published between 2018 and 2025, covering panel data from more than ten countries and industries. The synthesis shows that the direction of the relationship is not uniform: most studies report that ESG controversies reduce firm value and raise firm risk, a smaller number report a short-run positive association driven by media attention and investor overreaction effects, and the moderating role of a firm's underlying ESG performance is mixed. The paper concludes with implications for managers, investors, and regulators, and outlines a methodology that a future primary study with access to firm-level ESG controversy and financial data could follow

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