Research on the Impact of ESG Rating Divergence on Audit Fees

Abstract

ESG rating differences reflect the differences in the evaluation of ESG performance of the same enterprise by different rating agencies, which will have an impact on audit institutions based on the theory of information asymmetry. Based on the sample of A-share listed companies in China from 2019 to 2023, this paper confirms that there is a significant positive correlation between ESG rating divergence and audit fees. The paper proposes that information risk level of enterprises is the mediating mechanism underlying the effect of ESG rating divergence on audit fees. However, the mediating effect is nonsignificant. The author suggests that the theoretical mismatch of proxy variables and the regulatory effect of China's special situation may explain the nonsignificant findings. Heterogeneity analysis shows that among enterprises belonging to lightly polluting industries, ESG rating divergence has a more significant impact on audit fees. The conclusions not only enrich the economic consequences of ESG rating divergence, expand the theoretical understanding of the factors affecting audit fees, but also provide an important reference for ESG rating optimization, enterprise risk reduction and regulatory authorities to improve the information disclosure system.