Weathering the storm: Environmental controversy, ESG practices and organizational performance
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2025-07-10
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en
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This study examines how Environmental, Social, and Governance (ESG) practices influence organizational performance in firms facing environmental controversies, and whether this relationship is mediated by ESG controversies. While prior research suggests that ESG can provide reputational insulation during crises, the empirical evidence remains mixed. Using a dataset of 336 S&P 1500 firms from 2010-2024, this study applies multiple linear regression and mediation analysis to assess short-term organizational performance through cumulative abnormal return and long-term organizational performance through a composite of Return on Assets, Return on Equity, and Tobin’s Q. Findings indicate that ESG practices do not significantly improve short- or long-term organizational performance in this context. However, transparent disclosure of ESG activities is positively associated with long-term performance, underscoring the importance of perceived authenticity. These results suggest that ESG efforts alone may not shield firms from the consequence of environmental crises, and that stakeholder perception of ESG activities plays a crucial role.
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Faculteit der Managementwetenschappen