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<p>As environmental, social, and governance (ESG) investing gains prominence, the divergence in ESG ratings across agencies has drawn growing attention from institutional investors and academic researchers. Grounded in information asymmetry theory, this study examines the effect of ESG rating disagreement on institutional ownership using a panel dataset of A-share listed firms in China from 2015 to 2022. Empirical results indicate that greater ESG rating disagreement is associated with lower institutional ownership, suggesting that inconsistent ESG assessments heighten uncertainty and prompt more cautious investment behavior. Mechanism analysis reveals that higher levels of market information efficiency attenuate this negative relationship, as efficient markets enhance investors’ ability to process and reconcile conflicting ESG signals. Further heterogeneity analysis shows that the decline in institutional ownership is more pronounced among firms rated by domestic ESG agencies, among stable institutional investors, and in high-tech sectors. By integrating the moderating role of market information efficiency, this study deepens the understanding of how ESG rating disagreement shapes institutional investment under informational frictions and contributes to the broader ESG literature, particularly in the context of emerging markets.</p>

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ESG rating disagreement, market information efficiency and institutional investor shareholding behavior

  • 期刊论文

  • 发表日期：

    2025年8月23日

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  • Guoqing Chen,
  • Qianqian Wang

摘要

As environmental, social, and governance (ESG) investing gains prominence, the divergence in ESG ratings across agencies has drawn growing attention from institutional investors and academic researchers. Grounded in information asymmetry theory, this study examines the effect of ESG rating disagreement on institutional ownership using a panel dataset of A-share listed firms in China from 2015 to 2022. Empirical results indicate that greater ESG rating disagreement is associated with lower institutional ownership, suggesting that inconsistent ESG assessments heighten uncertainty and prompt more cautious investment behavior. Mechanism analysis reveals that higher levels of market information efficiency attenuate this negative relationship, as efficient markets enhance investors’ ability to process and reconcile conflicting ESG signals. Further heterogeneity analysis shows that the decline in institutional ownership is more pronounced among firms rated by domestic ESG agencies, among stable institutional investors, and in high-tech sectors. By integrating the moderating role of market information efficiency, this study deepens the understanding of how ESG rating disagreement shapes institutional investment under informational frictions and contributes to the broader ESG literature, particularly in the context of emerging markets.