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Can institutional investors mitigate ESG rating disagreement? Evidence from China

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  • Liu, Yuxin
  • Yang, Nan

Abstract

The rise of institutional investors in China, within a still-evolving ESG framework, offers a compelling case to investigate their role in mitigating ESG rating disagreement. Using data on Chinese A-share listed firms from 2009 to 2023, we find that institutional ownership significantly reduces ESG rating disagreement, with results robust to endogeneity concerns and alternative specifications. This effect operates through enhanced ESG awareness, improved ESG disclosure, and promoted ESG practices. Heterogeneity analysis reveals that pressure-resistant, stable institutional investors have a more significant impact on reducing ESG rating disagreement. Besides, this mitigating effect is particularly evident among polluting firms, non-state-owned enterprises, companies with greater female representation on the board, as well as those operating in more competitive markets, more open regions, and under greater media attention. Further analysis examines policy shocks that capture major macro-level developmental shifts, uncovering that capital market internationalization, green finance development, and digital transformation strengthen the capacity of institutional investors to mitigate ESG rating disagreement. These findings provide valuable insights for advancing ESG stewardship and promoting sustainability.

Suggested Citation

  • Liu, Yuxin & Yang, Nan, 2026. "Can institutional investors mitigate ESG rating disagreement? Evidence from China," Global Finance Journal, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:glofin:v:70:y:2026:i:c:s1044028326000347
    DOI: 10.1016/j.gfj.2026.101266
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