When do ESG controversies reduce firm value in India?

This study investigates whether, when, and how media coverage of environment, social, and governance (ESG) controversies, type of media reach, and media severity affects firm value in India's emerging and developing market. By anchoring enacted sensemaking theory with agenda-setting theory and attribution theory, we offer the first investigation of how firm value is impacted by the reach and severity of ESG controversies in the context of voice and accountability (VA). Drawing on a comprehensive dataset for 2007–2016, this study reveals the critical condition for ESG controversies to impact firm value. The media coverage of ESG controversies decreases firm value only when the media reach is high, as high reach has a more distributable capacity and greater situated cognition magnitude. On the other hand, media coverage could enhance firm value when the severity is high, as higher severity results in sensemaking intensification that lowers crisis severity. Upon reflection on these results, our study reveals that the fundamental media machinery expected to control ESG controversies is possibly much more fragile than formerly understood. Therefore, mere media reporting of ESG controversies does not overtly lead to stakeholders' sanctions and valuation effects.