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ESG controversies, corporate governance, and the market for corporate control

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  • Sirimon Treepongkaruna
  • Khine Kyaw
  • Pornsit Jiraporn

Abstract

Capitalizing on a unique measure of takeover vulnerability, we examine how the takeover market, which is widely regarded as a crucial instrument of external governance, influences environmental, social, and governance (ESG) controversies. This paper is the first to investigate how corporate control markets are influenced by the market for corporate control. The sample consists of unbalanced panel data from 6,236 firm-year observations during 2002–2014. We use Propensity Score Matching (PSM) and Instrumental Variable (IV) analyses to address potential endogeneity, and entropy-balancing approach to address the issue of observable selection. The results show that the disciplinary mechanism associated with the takeover market compels managers to take actions that benefit shareholders, thus avoiding ESG controversies. An increase in takeover susceptibility by one standard deviation resulted in a 10.12% decline in controversial activities. Furthermore, we find that firm profitability drops, and risk increases substantially in response to ESG controversies.

Suggested Citation

  • Sirimon Treepongkaruna & Khine Kyaw & Pornsit Jiraporn, 2024. "ESG controversies, corporate governance, and the market for corporate control," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 14(4), pages 815-842, October.
    • Handle: RePEc:taf:jsustf:v:14:y:2024:i:4:p:815-842
    DOI: 10.1080/20430795.2024.2334253
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    Citations

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    Cited by:

    1. Sirimon Treepongkaruna & Pattarake Sarajoti & Chaiyuth Padungsaksawasdi, 2024. "Strategic responses to hostile takeover threats: Empirical evidence on enhancing corporate social engagement," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(6), pages 5208-5219, November.
    2. Sirimon Treepongkaruna & Hue Hwa Au Yong & Steen Thomsen & Khine Kyaw, 2024. "Greenwashing, carbon emission, and ESG," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 8526-8539, December.
    3. Nuraini Desty Nurmasari & Adin Gustina & Muhammad Fuad & Yi-Chang Chen & Su Chuan Liu, 2026. "The Double-Edged Role of ESG: Cost in Stability, Resilience in Crisis in an Emerging Market Context," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 44-65.
    4. Inmaculada Bel‐Oms, 2025. "Determinants and consequences of environmental, social and governance controversies. Status quo and limitations of recent empirical quantitative research," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(2), pages 2412-2437, March.
    5. Maria Roszkowska‐Menkes, 2025. "ESG pay and corporate social irresponsibility: Does culture matter?," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 34(4), pages 1860-1885, October.
    6. Changjun Zheng & Md. Abdul Mannan Khan & Mohammad Morshedur Rahman & Syed Moudud-Ul-Huq & Md. Shahinur Rahman, 2025. "ESG Performance and Financial Stability: A Bibliometric and Meta-Analysis," SAGE Open, , vol. 15(4), pages 21582440251, October.
    7. Xiaoting Ling & Yuan George Shan & Wuqing Wu & Lu Zhang & Xinyue Zhang, 2025. "Do overpaid dividends drive stock price crash risk?," Economics and Politics, Wiley Blackwell, vol. 37(1), pages 7-58, March.

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