ESG Rating Divergence and Corporate Debt Structure: Evidence from China

Against the backdrop of rising global debt risks and increasing attention to debt-structure optimization, this study examines how ESG rating divergence relates to corporate debt structure. Using Chinese A-share listed firms from 2015 to 2023, we find that ESG rating divergence is associated with higher debt concentration and lower debt-type diversity. It is also linked to a lower share of interest-bearing liabilities and a higher share of non-interest-bearing liabilities. Mechanism analyses indicate that debt financing costs and cash flow volatility serve as important channels, as they restrict firms’ access to stable external financing. Additional analyses reveal that these effects are amplified when regional financial development is limited, external media attention is low, ESG reports are not externally assured, and managerial short-termism is more severe. In addition, rating divergence across the three ESG pillars is significantly related to debt-structure adjustments. By linking ESG rating divergence to firms’ debt financing choices, this study extends the ESG finance literature and offers practical implications for corporate financing decisions, investor risk assessment, and ESG rating regulation.