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ESG Rating Divergence: Cost of Digital Finance
Jiahui Guo  1@  , Tiantian Tang  1@  , Martin Young  2@  , Liping Zou  2@  
1 : Shandong University
2 : Massey University

We examine the impact of digital finance on ESG divergence over 2011-2022 in China. Our findings indicate that higher digital finance levels are associated with increased ESG divergence. Mechanism analysis reveals that digital finance exacerbates ESG divergence by intensifying information overload through heightened market attention and reduced transparency, hindering consensus among rating agencies. The effect is more pronounced in SOEs, firms with higher institutional ownership, weaker financial supervision, and operating in less-polluted industries. These insights underscore the need for regulatory frameworks that promote better ESG reporting, enabling investors to navigate rating discrepancies in an increasingly digital financial landscape.


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