ESG rating disagreements and stock price crash risk: can distraction, regional digital economy and corporate intelligence maturity play important roles?

Purpose - ESG issues are gaining increasing attention from investors, but the environmental, social and governance (ESG) rating disagreement caused by different standards of rating agencies misleads investors' investment decisions. This can lead to an increased risk of stock price crashes, causing turbulence in the financial markets and reducing investors' confidence. The paper investigates whether ESG rating disagreement of the current period increases stock price crash risk and the mechanism to mitigate this impact. Design/methodology/approach - With the sample of the listed companies of Shanghai and Shenzhen Stock Exchanges from 2010 to 2022 this paper examines the impact of ESG rating disagreement itself on stock price crash risk. Moreover, this paper examines the mechanisms by analyzing the moderating effect of distraction of investors; digital economy and corporate intelligence maturity. Findings - This paper finds that ESG rating disagreement itself would amplify the stock price crash risk. When exploring the moderating effect of institutional investors' distraction, digital economic development level and corporate intelligence, the paper found that they would mitigate the impact of ESG rating disagreement on stock price crash risk. The relationship between ESG rating disagreement and stock price crash risk is more pronounced in the context of heavily-polluted, state-owned enterprises (SOEs) and enterprises with star analysts. Originality/value - Currently, few articles discuss ESG rating disagreement, especially the impact of current ESG rating disagreement on stock price crash risk. This paper focuses on this topic and provides strategies to mitigate the impact of current ESG rating divergence on stock price crash risk.