ESG Rating Divergence and Post-Earnings Announcement Drift: Evidence from China

This study uses data from Chinese A-share listed firms from 2015 to 2022 to explore how Environmental, Social, and Governance (ESG) rating divergence affects post‑earnings announcement drift. We find that post-earnings announcement drift is prevalent in the Chinese A-share market and that ESG rating divergence significantly alleviates this drift in the short term. Particularly, this effect is more pronounced in firms with high security analyst attention and sound internal controls. Further analysis shows that ESG rating divergence influences post‑earnings announcement drift by enhancing corporate information transparency and boosting investor confidence. This study enriches the understanding of ESG rating divergence by highlighting its impact on post-earnings announcement drift. Our findings are significant as they provide an accurate assessment of the effects of this divergence, helping to refine current ESG rating standards.