The Impact of Controversial Esg On the Market Value and Financial Constraints of Brics Companies

Abstract

Objective: Analyze the relationship between the controversial ESG and the market value and the financing restrictions of companies that make up the BRICS. Method: 403 companies from the capital markets of the BRICS member countries were analyzed from 2017 to 2022, making a total of 2702 total observations. The main analysis of the study was carried out using Panel Data regressions, Pooled model. The main research model tested the relationship between market value and the financial constraints indicator, as dependent variables, and controversial ESG as the main explanatory variable. Results: There was a negative relationship between the controversial ESG score and the market value of the companies analyzed. From this result, it was possible to infer that negative experiences, events and news in relation to ESG practices tend to generate a reduction in the market value of a company, corroborating previous studies and one of the hypotheses of this study. However, the increase in the controversial ESG score was found to reduce the company's financing constraints, differing from expected. Contributions: The practical conclusions of this research point to the importance of companies continuing to analyze in depth the potential negative impacts that controversial ESG can generate in the financial sphere, covering the short, medium and long term. Furthermore, corporate and public policy makers have the opportunity to improve the regulatory structures of both companies and governments regarding the integration of ESG into investment activities. This, in turn, not only helps to avoid a reduction in the market value of companies, but also prevents a decrease in the financing options available to them.