ESG controversies and corporate performance: The moderating effect of governance mechanisms and ESG practices

Abstract This paper investigates the relationship between Environmental, Social, and Governance (ESG) controversies and firm performance, examining the moderating influences of corporate governance structures and ESG practices. Utilizing quantitative methods, we analyze data from 5360 firm‐year observations. Our findings reveal a significant negative relation between ESG controversies and firm performance. However, well‐defined corporate governance frameworks and internal ESG strategies mitigate these adverse impacts and can transform these controversies into growth opportunities and reputation enhancement. A comparative analysis involving the United Kingdom and other European Union nations highlights the…