1381155_Xue,R_2023.pdf (1.28 MB)
The adverse impact of corporate ESG controversies on sustainable investment
journal contributionposted on 2023-11-17, 02:26 authored by Rui XueRui Xue, Hongqi Wang, Yuhao Yang, Martina K Linnenluecke, Kaifang Jin, Cynthia Weiyi Cai
Global businesses are facing increasingly significant climate risks. Firms with ESG controversies will likely suffer from higher financing costs and inadequate investment capability, leading to investment inefficiency. We use a newly introduced ESG Controversy Score database to investigate the relationship between ESG controversies and corporate investment efficiency. The results show that ESG controversies significantly reduces firms’ overall investment efficiency, and such adverse impact is manifest in underinvestment inefficiency. Further analysis indicates that such a negative effect is more pronounced in firms with larger size and higher analyst coverage. Our findings highlight the significant role of ESG misbehaviour in corporate sustainable development.