ESG performance and corporate external financing in China: The role of rating disagreement

Abstract

Following the thriving literature on the impacts of ESG performance on corporate financing, this paper investigates corporate ESG performance and debt-financing using a sample of Chinese listed firms. We pay special attention to the influence of rating disagreements across different agencies. While the positive role of ESG performance on the cost and amount of corporate debt financing is revealed, clear heterogeneity is found. More importantly, we uncover the role of rating disagreement, and find that only firms with agreed high ESG rating can benefit through lost cost and larger amount debt-financing. The results confirm the needs for firms to improve information disclosure and pay special attention to ESG performance. Moreover, improving ESG rating quality and establishing a consistent and effective rating system deserve regulators’ attention.