Does divergence in ESG ratings between domestic and foreign agencies impact firm valuation in China?*

Ziyu Zhang and Lintian Geng

Asia-Pacific Journal of Accounting & Economics, 2026, vol. 33, issue 3, 481-497

Abstract: This study explores the relationship between ESG rating divergence across domestic and foreign agencies and firm valuation in China. Using a firm-level fixed effects model, we demonstrate that greater ESG rating divergence correlates with a lower P/B ratio for A-share listed companies. This effect is more pronounced among non-state-owned enterprises and firms with higher average ESG ratings. Furthermore, ESG rating divergence is associated with diminished corporate reputation and reduced investor attention, which substantially reduce firm valuation, primarily by influencing overseas institutional investors. This paper contributes to the literature on the economic consequences of ESG rating divergence in emerging markets.

Date: 2026
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DOI: 10.1080/16081625.2025.2489455

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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