Will Higher ESG Rating Rankings Reduce Corporate Non-compliance

This paper explores the potential impact of ESG ratings on corporate non-compliance and its mechanism of action. Based on the data of China's A-share listed companies from 2007 to 2022, the ESG disclosure index is constructed as a control variable using textual analysis, and empirical analyses are carried out using a two-way fixed effects model. It is found that ESG rating ranking has a significant inhibitory effect on corporate non-compliance, and the effect is relatively weak among state-owned enterprises, enterprises with large ESG rating divergence, and enterprises with high external attention. Further mechanism tests show that ESG rating ranking indirectly inhibits corporate non-compliance by reducing corporate financing constraints. This finding reveals the important role of ESG ratings in promoting compliant operations and provides new perspectives for understanding the relationship between ESG ratings and firm behavior. The findings of this paper have important theoretical and practical implications for improving corporate governance mechanisms, promoting sustainable development, and optimizing capital market resource allocation.