IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v74y2025ics0275531924004951.html
   My bibliography  Save this article

A legal origins perspective on ESG rating disagreement

Author

Listed:
  • Kurbus, Barbara
  • Rant, Vasja

Abstract

Firms’ environmental, social, and governance (ESG) scores vary significantly across rating providers. This article considers the legal origins theory as a potential factor influencing ESG rating disagreement. By comparing ESG scores from five reputable rating providers – Bloomberg, S&P Global, LSEG, MSCI, and Sustainalytics – for a sample of 2392 public firms incorporated across 53 countries, we find that correlation disagreement between rating providers is lower for civil law firms, while dispersion disagreement across rating providers is lower for common law firms. This suggests, firstly, that civil law firms are influenced more by shared factors such as national policies, regulations and industry practices, leading to higher correlations in ESG scores between rating providers, and secondly, that common law firms engage in more independent and firm-specific ESG efforts, resulting in lower ESG dispersion across rating providers.

Suggested Citation

  • Kurbus, Barbara & Rant, Vasja, 2025. "A legal origins perspective on ESG rating disagreement," Research in International Business and Finance, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:riibaf:v:74:y:2025:i:c:s0275531924004951
    DOI: 10.1016/j.ribaf.2024.102702
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531924004951
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2024.102702?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    2. Hao Liang & Luc Renneboog, 2017. "On the Foundations of Corporate Social Responsibility," Journal of Finance, American Finance Association, vol. 72(2), pages 853-910, April.
    3. Monica Billio & Michele Costola & Iva Hristova & Carmelo Latino & Loriana Pelizzon, 2021. "Inside the ESG ratings: (Dis)agreement and performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(5), pages 1426-1445, September.
    4. Samuel Drempetic & Christian Klein & Bernhard Zwergel, 2020. "The Influence of Firm Size on the ESG Score: Corporate Sustainability Ratings Under Review," Journal of Business Ethics, Springer, vol. 167(2), pages 333-360, November.
    5. Dumrose, Maurice & Rink, Sebastian & Eckert, Julia, 2022. "Disaggregating confusion? The EU Taxonomy and its relation to ESG rating," Finance Research Letters, Elsevier, vol. 48(C).
    6. Hatice Ozer Balli & Bent Sørensen, 2013. "Interaction effects in econometrics," Empirical Economics, Springer, vol. 45(1), pages 583-603, August.
    7. Florian Berg & Julian F Kölbel & Roberto Rigobon, 2022. "Aggregate Confusion: The Divergence of ESG Ratings [Corporate social responsibility and firm risk: theory and empirical evidence]," Review of Finance, European Finance Association, vol. 26(6), pages 1315-1344.
    8. Aaron K. Chatterji & David I. Levine & Michael W. Toffel, 2009. "How Well Do Social Ratings Actually Measure Corporate Social Responsibility?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 125-169, March.
    9. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    10. Rajna Gibson Brandon & Philipp Krueger & Peter Steffen Schmidt, 2021. "ESG Rating Disagreement and Stock Returns," Financial Analysts Journal, Taylor & Francis Journals, vol. 77(4), pages 104-127, October.
    11. Pedersen, Lasse Heje & Fitzgibbons, Shaun & Pomorski, Lukasz, 2021. "Responsible investing: The ESG-efficient frontier," Journal of Financial Economics, Elsevier, vol. 142(2), pages 572-597.
    12. Aaron K. Chatterji & Michael W. Toffel, 2010. "How firms respond to being rated," Strategic Management Journal, Wiley Blackwell, vol. 31(9), pages 917-945, September.
    13. Avramov, Doron & Cheng, Si & Lioui, Abraham & Tarelli, Andrea, 2022. "Sustainable investing with ESG rating uncertainty," Journal of Financial Economics, Elsevier, vol. 145(2), pages 642-664.
    14. Mahoney, Paul G, 2001. "The Common Law and Economic Growth: Hayek Might Be Right," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 503-525, Part I Ju.
    15. Avramov, Doron & Chordia, Tarun & Jostova, Gergana & Philipov, Alexander, 2009. "Dispersion in analysts' earnings forecasts and credit rating," Journal of Financial Economics, Elsevier, vol. 91(1), pages 83-101, January.
    16. Luluk Widyawati, 2021. "Measurement concerns and agreement of environmental social governance ratings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1589-1623, April.
    17. Aaron K. Chatterji & Rodolphe Durand & David I. Levine & Samuel Touboul, 2016. "Do ratings of firms converge? Implications for managers, investors and strategy researchers," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1597-1614, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cheng, Louis T.W. & Cheong, Tsun Se & Wojewodzki, Michal & Chui, David, 2025. "The effect of ESG divergence on the financial performance of Hong Kong-listed firms: An artificial neural network approach," Research in International Business and Finance, Elsevier, vol. 73(PA).
    2. Wang, Haijun & Jiao, Shuaipeng & Ge, Chen & Sun, Guanglin, 2024. "Corporate ESG rating divergence and excess stock returns," Energy Economics, Elsevier, vol. 129(C).
    3. Jian Zhou & Xiaodong Lei & Jianglong Yu, 2024. "ESG rating divergence and corporate green innovation," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 2911-2930, May.
    4. Muck, Matthias & Schmidl, Thomas, 2024. "Comparing ESG score weighting approaches and stock performance differentiation," Finance Research Letters, Elsevier, vol. 67(PB).
    5. Tsang, Albert & Wang, Yujie & Xiang, Yi & Yu, Li, 2024. "The rise of ESG rating agencies and management of corporate ESG violations," Journal of Banking & Finance, Elsevier, vol. 169(C).
    6. Liu, Xiangqiang & Yang, Qingqing & Wei, Kai & Dai, Peng-Fei, 2024. "ESG rating disagreement and idiosyncratic return volatility: Evidence from China," Research in International Business and Finance, Elsevier, vol. 70(PB).
    7. Wang, Xue & Liu, Qingyuan, 2024. "Information disclosure and ESG rating disagreement: Evidence from green bond issuance in China," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    8. Zou, Jin & Yan, Jingzhou & Deng, Guoying, 2023. "ESG rating confusion and bond spreads," Economic Modelling, Elsevier, vol. 129(C).
    9. Xiaoyan Xu & Hong Zhao, 2024. "An Empirical Study on ESG Evaluation of Chinese Energy Enterprises Based on High-Quality Development Goals—A Case Study of Listed Company Data," Sustainability, MDPI, vol. 16(15), pages 1-22, August.
    10. Horn, Matthias & Oehler, Andreas, 2024. "Constructing stock portfolios by sorting on ESG ratings: Does the rating provider matter?," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    11. Caterina Lucarelli & Sabrina Severini, 2024. "Anatomy of the chimera: Environmental, Social, and Governance ratings beyond the myth," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4198-4217, July.
    12. Wen, Limin & Li, Junxue & Sheng, Jiliang & Zhang, Yi, 2025. "Active portfolio management in the face of ESG uncertainty: An agile framework for adaptive investment strategies," The North American Journal of Economics and Finance, Elsevier, vol. 75(PA).
    13. Luo, Deqing & Shan, Xun & Yan, Jingzhou & Yan, Qianhui, 2023. "Sustainable investment under ESG volatility and ambiguity," Economic Modelling, Elsevier, vol. 128(C).
    14. Bassen, Alexander & Kordsachia, Othar & Lopatta, Kerstin & Tan, Weiqiang, 2025. "Revenue alignment with the EU taxonomy regulation in developed markets," Journal of Banking & Finance, Elsevier, vol. 170(C).
    15. Michele Rubino & Ilaria Mastrorocco & Giovanni Maria Garegnani, 2024. "The influence of market and institutional factors on ESG rating disagreement," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 3916-3926, September.
    16. Zhang, Cheng & Zha, Qianyao & Sun, Xun & Chen, Liping, 2024. "Does ESG rating disagreement affect audit opinions?," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    17. Wang, Jianli & Wang, Shaolin & Dong, Minghua & Wang, Hongxia, 2024. "ESG rating disagreement and stock returns: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    18. Minghua Dong & Miaomiao Li & Hongxia Wang & Yuanyuan Pang, 2025. "ESG Disagreement and Stock Price Crash Risk: Evidence from China," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(1), pages 267-299, March.
    19. Staněk Gyönyör, Lucie & Horváth, Matúš, 2024. "Does ESG affect stock market dependence? An empirical exploration of S&P 1200 companies shows the divergent nature of E–S–G pillars," Research in International Business and Finance, Elsevier, vol. 69(C).
    20. Cini, Federico & Ferrari, Annalisa, 2025. "Towards the estimation of ESG ratings: A machine learning approach using balance sheet ratios," Research in International Business and Finance, Elsevier, vol. 73(PB).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:74:y:2025:i:c:s0275531924004951. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.