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Does divergence in ESG ratings between domestic and foreign agencies impact firm valuation in China?

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  • Ziyu Zhang
  • Lintian Geng

Abstract

This study explores the relationship between ESG rating divergence across domestic and foreign agencies and firm valuation in China. Using a firm-level fixed effects model, we demonstrate that greater ESG rating divergence correlates with a lower P/B ratio for A-share listed companies. This effect is more pronounced among non-state-owned enterprises and firms with higher average ESG ratings. Furthermore, ESG rating divergence is associated with diminished corporate reputation and reduced investor attention, which substantially reduce firm valuation, primarily by influencing overseas institutional investors. This paper contributes to the literature on the economic consequences of ESG rating divergence in emerging markets.

Suggested Citation

  • Ziyu Zhang & Lintian Geng, 2026. "Does divergence in ESG ratings between domestic and foreign agencies impact firm valuation in China?," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 33(3), pages 481-497, May.
    • Handle: RePEc:taf:raaexx:v:33:y:2026:i:3:p:481-497
    DOI: 10.1080/16081625.2025.2489455
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