IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v13y2025i3p147-d1727332.html
   My bibliography  Save this article

ESG Rating Divergence and Stock Price Crash Risk

Author

Listed:
  • Chuting Zhang

    (College of Management, Nanjing University of Posts and Telecommunications, Nanjing 210003, China)

  • Wei-Ling Hsu

    (School of Civil Engineering, Jiaying University, Meizhou 514015, China)

Abstract

ESG has emerged as a key non-financial indicator, drawing significant investor focus. Disparities in ESG ratings may skew investor perceptions, potentially endangering stock values and financial market stability. This paper examines the link between ESG rating divergences and stock price crash risk, drawing on data from six Chinese and global ESG rating agencies. Focusing on Shanghai and Shenzhen A-share listed firms, it analyzes information from 2015 to 2022 within the theoretical contexts of information asymmetry and external monitoring. This study finds that ESG rating divergence markedly elevates stock price crash risk, a relationship that persists through a series of robustness checks. Specifically, the mechanisms operate through two key pathways: increased reputational damage risk due to information asymmetry and reduced external monitoring due to weakened external governance. The results of the heterogeneity analysis indicate that ESG rating divergence exacerbates stock price crash risk more significantly for non-state-owned firms, firms with low levels of marketization, and firms in high-pollution industries. This study provides clear actionable strategic paths and policy intervention points for investors to avoid risks, firms to optimize management, and regulators to formulate policies.

Suggested Citation

  • Chuting Zhang & Wei-Ling Hsu, 2025. "ESG Rating Divergence and Stock Price Crash Risk," IJFS, MDPI, vol. 13(3), pages 1-23, August.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:3:p:147-:d:1727332
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/13/3/147/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/13/3/147/
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:gam:jijfss:v:13:y:2025:i:3:p:147-:d:1727332. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.