ESG Rating Divergence and Stock Return Volatility: Evidence from China

This study focuses on Chinese A-share listed companies from 2015 to 2022. Using ESG ratings data from six rating agencies—WIND, Huazheng, Susallwave, FTSE Russell, SynTao Green Finance, and Bloomberg—this research empirically examines the impact of ESG rating divergence on stock return volatility and explores the underlying mechanisms through mediation and moderation effect models. The results demonstrate that ESG rating divergence significantly increases stock return volatility. The mechanism analysis shows that digital transformation plays a key mediating role between ESG rating divergence and stock return volatility. Moreover, ESG report assurance effectively mitigates the impact of rating divergence on stock return volatility. The further heterogeneity analysis shows that ESG rating divergence exerts a stronger influence on stock return volatility in firms characterized by weaker corporate governance, limited media attention, and lower levels of pollution. This study adopts a financial risk perspective to deepen the understanding of the economic consequences of ESG rating divergence. It systematically reveals the underlying mechanisms through which rating divergence affects stock return volatility, providing empirical evidence and policy insights for improving ESG disclosure standards.