ESG Rating Disagreement and Corporate Total Factor Productivity:Inference and Prediction

Abstract

This paper explores the relationship between ESG rating disagreement and total factor productivity (TFP) based on data from Chinese domestic ESG rating agencies and financial data of A-share listed companies in China from 2015 to 2022. On one hand, the empirical results show that ESG rating disagreement reduces corporate TFP, a conclusion that is validated through multiple robustness tests. The mechanism analysis reveals an interaction effect between green innovation and ESG rating disagreement. Specifically, in firms without ESG rating disagreement, green innovation promotes the improvement of TFP; however, in firms with disagreement, although ESG rating disagreement may drive green innovation, this does not lead to an increase in TFP. Furthermore, ESG rating disagreement lower corporate TFP by increasing financing constraints. The heterogeneity analysis indicates that this effect is more pronounced in non-state-owned, asset-intensive, and low-pollution enterprises. On the other hand, XGBoost regression demonstrates that ESG rating disagreement play a significant role in predicting TFP, with SHAP values showing that the main effects are more evident in firms with larger ESG rating disagreement.