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Corporate digitalization and ESG rating divergence: Evidence from China

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  • Chen, Jingpeng
  • Lin, Haiying

Abstract

Different ESG rating agencies often produce significantly divergent assessments for the same firm, posing a substantial challenge for both stakeholders and firms. This divergence can mislead stakeholders, creating confusion and eroding trust in ESG assessments. Previous studies have primarily attributed ESG rating divergence to the lack of universal criteria among rating agencies. However, a more significant yet understudied factor is the information asymmetry between firms and rating agencies. Using a panel dataset of 22,314 firm-year observations from 4102 listed companies in China, we find support that explains how digitalization reduces ESG rating divergence. Drawing on signaling theory, we investigate the effect of firms' digitalization on ESG rating divergence. We argue that digitalization enables firms to reduce information asymmetry with rating agencies, thereby reducing ESG rating divergences. This effect is more pronounced for firms with greater media and analyst coverage. This study contributes to the literature on ESG reporting and information asymmetry, offering insights for practitioners to leverage digitalization to enhance ESG reporting transparency.

Suggested Citation

  • Chen, Jingpeng & Lin, Haiying, 2026. "Corporate digitalization and ESG rating divergence: Evidence from China," Research in International Business and Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:riibaf:v:82:y:2026:i:c:s0275531925005203
    DOI: 10.1016/j.ribaf.2025.103264
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