Does ESG rating disagreement discourage corporate green innovation? Evidence from China

The rapid development of ESG investment has led to the swift emergence of ESG rating agencies, causing ESG rating disagreements that impact corporate green innovation. This paper utilizes panel data from Chinese A-share listed companies to explore the impact of ESG rating disagreement on corporate green innovation and its underlying mechanisms. Our findings reveal that ESG rating disagreement negatively affects corporate green innovation, which is supported by several endogeneity and robustness tests. Mechanism analysis indicates that institutional investor shareholding and effective internal control mitigate these adverse effects. Further research shows that firms that are in central and western China, are not technology-intensive, have high market competition, and receive high investor attention are particularly susceptible to these negative impacts. Consequently, the government should encourage enterprises to actively implement ESG principles and accelerate the development of ESG rating standards and disclosure systems to foster high-quality corporate development.