The Impact of ESG Controversies on the Market Value in the Energy Sector

The energy sector has relatively higher exposure to controversial publicity due to the nature of industry operations. For this reason, this study focuses on the energy sector and aims to evaluate the impact of ESG controversies scores (Environmental Controversies, Social Controversies and Governance Controversies) of LSEG (former Refinitiv EIKON) database on market value of firms. We investigate the relationship between ESG controversies and the market value of 393 firms in 2018-2022 using Dynamic Panel Data Regression Models. The findings of the study, carried out with system GMM, reveal that the market value of firms in the previous period has had a statistically significant positive effect on the market value of firms in the current period. There is a positive and statistically significant relationship between market value and governance controversies. Yet, no statistically significant relationship was detected between market value and environmental controversies (CE), or market value and social controversies.