The impact of ESG rating disagreement on corporate risk-taking: evidence from China

Abstract

This paper examines the impact and underlying mechanisms of ESG rating disagreement on the risk-taking of Chinese companies listed on the Shanghai and Shenzhen stock exchanges from 2011 to 2020. The research reveals that ESG rating disagreement significantly increases corporate risk-taking. Mechanism tests show that corporate ESG rating disagreement can enhance corporate risk-taking by reducing information asymmetry and alleviating financing constraints. Further analyses find that the agency costs affect the enhancing effect of ESG rating disagreement on corporate risk-taking. Heterogeneity analysis reveals that ESG rating disagreement has a greater effect on corporate risk-taking for non-state-owned firms, small-sized firms, and young firms. This paper provides empirical evidence to promote the construction of China's ESG rating system and enhance corporate risk-taking.