Can investor-firm interactions mitigate ESG rating divergence? Evidence from China

Xiangqiang Liu, Jiayi Liu, Jia Liu and Qiong Zhai

International Review of Financial Analysis, 2024, vol. 96, issue PA

Abstract: This study empirically examines whether investor-firm interactions significantly influence the ESG rating disagreement among A-share listed companies in China. We use Q&A data between 2015 and 2021 from the Easy Interaction and E-Interaction platforms of the Shenzhen and Shanghai Stock Exchanges (SZSE and SSE). Our results reveal that investor-firm interaction can significantly reduce the ESG rating divergence, and this result remains robust after robustness tests. The mechanism test suggests that interactions related to ESG theme can improve the ESG disclosure quality and increase ESG practices; this leads to reduced information asymmetry, thus easing rating divergence. Further, the effect is more pronounced when listed companies' ESG disclosures are similar to those in their industry, non-centralized enterprises, low corporate governance level, and fewer green investors. From the ESG rating divergence mitigation perspective, this study provides empirical evidence on the economic consequences of emerging capital markets regarding investor-firm interactions.

Keywords: ESG rating disagreement; Investor-firm interactions; Corporate disclosure; Information asymmetry (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005441

DOI: 10.1016/j.irfa.2024.103612

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