The Impact Mechanisms of ESG Ratings on Corporate Green Technology Innovation: A Multi-Period Difference-in-Differences Analysis of Innovation Quantity, Quality, and Efficiency

This study examines the causal impact of environmental, social, and governance (ESG) ratings on corporate green technology innovation using a panel of Saudi listed firms over the period 2015–2024. Adopting a multi-period difference-in-differences (DID) framework, the analysis evaluates three dimensions of innovation outcomes—quantity, quality, and efficiency (CGTI1–CGTI3). The results show that ESG ratings significantly enhance green technology innovation. Dynamic evidence indicates that these effects strengthen over time, reflecting gradual adjustment in firms’ innovation strategies. Mechanism analysis reveals that ESG ratings promote innovation primarily by alleviating financial constraints and mitigating agency problems. These effects are driven by improvements in the information environment, as ESG ratings reduce information asymmetry and enhance monitoring. From a theoretical perspective, ESG ratings are conceptualized as a digital information infrastructure that reduces informational entropy and provides algorithmic evaluation signals, thereby guiding managerial decision-making in R&D investment and project selection. Robustness tests, including propensity score matching difference-in-differences (PSM-DID), confirm that the results are not driven by selection bias. Focusing on Saudi Arabia under Vision 2030, the findings highlight the role of ESG information systems in shaping green innovation in an emerging market context.