Sustainability and firm value in the oil and gas industry—A vicious circle?

Abstract The relationship between sustainability (or CSR) and company value has been intensively researched in recent times. However, the specifics of individual industries have not been sufficiently taken into account. Our study aims to fill this research gap. We focus on the oil and gas industry as a particularly powerful and controversial industry. Based on legitimacy theory and institutional theory, we argue that the relationship between firm value and sustainability is negative in this industry. Our sample consists of 205 firms with 1515 observations. Using a simultaneous equation system (3SLS) to determine its direction, we find the two to be negatively interrelated in a vicious circle. Furthermore, we find evidence for a moderating role of the renewable energy share of a company's headquarter country as well as the company's industry segment. The explanatory power continues to hold with consideration of a profitability measure (Return on Sales) instead of firm value.