Grain by grain: How rice farming cultivates ESG rating consistency?

This paper investigates how regional culture shapes firms' CSR/ESG rating divergence. Exploiting the historical prevalence of rice (wheat) farming in China as an exogenous proxy for collectivist (individualistic) culture, we find that firms headquartered in collectivist regions exhibit significantly lower ESG rating divergence. This effect remains robust across multiple identification strategies and persists after addressing potential endogeneity concerns. We further show that collectivist culture reduces ESG rating disagreement by promoting ESG transparency and governance, reflected in increased voluntary ESG disclosure and enhanced internal control systems. Additional analyses reveal that this mitigating effect is more pronounced among firms facing weak external monitoring, consistent with collectivist culture substituting for formal governance oversight. Finally, quantile regression results indicate that the influence of collectivist culture intensifies where ESG rating divergence is most substantial, underscoring its role in disciplining corporate ESG behavior.