Beyond the Rating: How Disagreement Among ESG Agencies Affects Bond Credit Spreads

Abstract

Based on data from Chinese corporate bonds issued between 2014 and 2023, this study examines how ESG rating disagreement affects credit spreads. The results indicate that such disagreement significantly increases spreads through financial risk and information asymmetry channels, though this effect is mitigated by higher bond ratings. The impact is more pronounced in developed regions, highly marketized areas, less polluted and less competitive industries, non-Big Four audited firms, small enterprises, and state-owned enterprises. Increases in credit spreads are mainly driven by environmental and social rating disagreements, with the governance dimension playing a limited role.