Impact of ESG Rating Disagreement on Debt Financing Costs

Using the data of Chinas A-share non-financial listed enterprises from 2015 to 2022 as a sample, this study empirically tests the impact of ESG rating disagreement on corporate debt financing cost. The results show that ESG rating disagreement significantly increases the debt financing costs of enterprises, and this result still holds after a series of robustness tests such as replacing the dependent and independent variables and PSM approach. Meanwhile, the heterogeneity analysis reveals that non-state-owned enterprises and enterprises in non-heavily polluting industries are more sensitive to ESG ratings disagreement. In addition, mechanism analysis shows that corporate financing constraints mediate the relationship between ESG rating disagreements and debt financing costs. The findings of this study provide important evidence for understanding the impact of ESG rating disagreement on the costs of debt financing, enrich the meaning of ESG rating disagreement, and reveal the significance of unifying ESG rating standards.