Performance Feedback and Environmental, Social, Governance Controversies—Whether Nation‐Level Institutions Matter?

ABSTRACT Prior literature reports inconsistent findings regarding the impact of firm performance feedback on corporate controversies in single‐country contexts. This study examines the role of performance feedback on environmental, social, and governance (ESG) controversies across countries, incorporating nation‐level institutions as moderators, including the education and labor system, political system, financial system, and cultural system. Study results show an inverse U‐shaped relationship between negative performance feedback and firms' exploration of ESG controversies. I strongly support the idea that most nation‐level institutions moderate the effects on firm‐level ESG controversies under different performance feedback conditions. Specifically, I observe that positive moderation of competition and regulation, the presence of corruption, and the availability of skilled labor draw firms toward ESG controversies. Additionally, financial system factors and low power distance would weaken that intent. Additionally, firms from developed economies with negative performance feedback are more likely to engage in ESG controversies, whereas their positive counterparts are controversy‐averse. On the contrary, emerging economies' negative performance feedback firms show overall similar results, whereas their positive counterparts report insignificant results.