Can Sustainability (ESG) Controversies Be Offset with Advertising? An Empirical Investigation into Advertising, Negative ESG, and Firm Value

Nicole Hanson () and Stacey Sharpe ()
Additional contact information
Nicole Hanson: Department of Management and Marketing, College of Business, Idaho State University, 921 South 8th Avenue, Pocatello, ID 83209, USA
Stacey Sharpe: Department of Marketing, College of Business and Economics, California State University, 5151 State University Drive., Los Angeles, CA 90032, USA

JRFM, 2025, vol. 18, issue 2, 1-17

Abstract: Can advertising improve firm value following an incident of negative sustainability (i.e., a negative environmental, social or governance (NESG) occurrence?) This study provides an empirical investigation into NESG, its individual domains, and the mitigating role of advertising on firm value. We investigate firm level ESG sustainability violations and any corresponding advertising expenditures, utilized to counter negative opinions. First, we examine whether an NESG occurrence reduces firm value. Next, we investigate if firms experiencing an NESG occurrence alter their advertising expenditures and assess the resulting impact of this advertising spending on firm value. Finally, we determine if certain NESG occurrences benefit more from advertising than others. Using a sample of firms which engaged in at least one NESG event between 1995 and 2019, we find that firms increase advertising as a way to engage in damage control. Increasing advertising expenditures to offset NESG occurrences ultimately impacts firm value. Specifically, increasing advertising helps to reduce the NESG occurrence’s effect on firm value, but the individual domains of ESG do not respond the same to advertising efforts, suggesting that advertising as a mitigation tool remains nuanced, with the greatest positive effect being for environmental crises, no significant effect for social crises, and a negative effect for governance crises.

Keywords: sustainability; ESG; advertising; brand crisis; brand crisis response; corporate social irresponsibility (CSI); firm value (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/18/2/86/pdf (application/pdf)
https://www.mdpi.com/1911-8074/18/2/86/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:18:y:2025:i:2:p:86-:d:1583956

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().