Exploring the Role of Brand Capital Investment in the Realization of Firm-Level ESG Benefits and Consequences on Firm Performance: An Empirical Study

This study examines how environmental, social, and governance (ESG) occurrences relate to firm performance and how these relationships depend on firms’ investments in brand capital. Using firm-level data spanning more than two decades, we analyze the effects of positive and negative ESG events on market-based (sales) and accounting-based (return on assets; ROA) performance for firms with and without brand capital investment (BCI). Using panel data on U.S. firms from 1995 to 2019, we compare firms that invest in brand capital through advertising with firms that do not. The results reveal an interesting asymmetric pattern. Specifically, BCI firms experience greater sales gains following positive ESG occurrences but incur significantly larger losses following negative ESG events. Interestingly, non-BCI firms benefit less from positive ESG activities but face smaller penalties from negative ESG occurrences. This study contributes to the marketing literature by examining brand capital investment and how ESG activities translate into performance gains versus when they impose performance costs for firms.