ESG Rating Disagreement, Financing Costs, and Enterprise Value

In the backdrop of escalating global issues such as climate change, social inequality, and governance risks, environmental, social, and governance (ESG) factors have garnered immense attention worldwide. The ESG rating, a crucial metric that assesses a company's sustainability performance, holds significant importance for investors, managers, and regulatory authorities. Drawing upon comprehensive data from Chinese listed companies between 2015 and 2022, this article delves deeper into the intricate relationship between ESG rating differences and corporate value. Our findings reveal that an increase in ESG rating disparities can lead to a decline in corporate value. This is primarily attributed to investors demanding higher returns to compensate for the potential risks associated with lower ESG ratings, ultimately resulting in increased financing costs for the companies. This research not only enhances investors' understanding of the impact of ESG ratings on corporate value but also provides managers with practical guidance on how to improve their ESG management practices. Additionally, it offers regulators valuable insights on leveraging ESG rating information for effective risk monitoring and regulation, thereby promoting sustainable business practices and contributing to a more resilient and sustainable future.