The conditional value of ESG: Purpose–Performance paradox and economic outcomes in Indian firms

Drawing on stakeholder theory, signaling theory, and the resource-based view, this study examines the financial consequences of ESG controversies among Indian firms in the post-BRSR regulatory environment. Using observations from non-financial companies, we employ hierarchical regression models to investigate the direct, lagged, and moderating effects of ESG controversies and ESG performance on firm value and profitability. The findings reveal that ESG controversies significantly erode short-term market valuation, while their effects on accounting performance are weaker and less persistent. Contrary to the conventional ESG “insurance-like” argument, strong ESG performance does not consistently shield firms from controversy-related losses. Instead, controversies appear to weaken the valuation premium associated with superior ESG profiles, giving rise to a purpose–performance paradox. The study contributes to the ESG literature by demonstrating that the value of ESG is conditional on credibility and consistency, highlighting the importance of controversy-free execution for sustaining firm value in emerging markets.