THE IMPACT OF ESG CONTROVERSIES ON THE MARKET VALUE IN THE ENERGY SECTOR

The energy sector has relatively higher exposure to scandals and controversial publicity due to the nature of industry operations. AThus, this study focuses on the energy sector to evaluate the impact of ESG (Environmental, Social and Governance) controversy scores of LSEG database on market value of firms. We investigate the relationship between ESG controversies and the market value of 393 firms using annual data from 2013 to 2022 through Dynamic Panel Data system GMM Regression Models. The findings of the study 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. Our analysis reveals a positive and statistically significant association between Governance Controversy scores and market value. Our findings suggest governance controversies have the most direct and measurable impact on firm value in the energy sector, possibly due to their stronger influence on operational performance and investor confidence. Implications of the study may help investors and policymakers to make decisions that prioritize ESG considerations in the energy sector as firms with fewer governance controversies are rewarded by investors with higher valuations.