ESG Rating Disagreement and the Quality of Analysts' Forecasts: Information or Noise

Menghan Li; Qi Chen

doi:10.1002/ijfe.3089

journal article Dec 17, 2024

ESG Rating Disagreement and the Quality of Analysts' Forecasts: Information or Noise

Menghan Li

Qi Chen

International Journal of Finance & Economics Vol. 30 No. 4 pp. 3744-3760 · Wiley

View at Publisher Save 10.1002/ijfe.3089

Abstract

ABSTRACTThe rise of ESG investment has stimulated the development of ESG ratings, while there is substantial ESG rating disagreement among different rating agencies, which creates a major obstacle to sustainable investment. This study empirically examines the impact of ESG rating disagreement on the quality of analysts' forecasts based on the data of Chinese listed companies from 2015 to 2021. It is found that the ESG rating disagreement significantly improves the quality of analysts' forecasts. Mechanism analysis demonstrates that ESG rating disagreement can enhance the quality of analysts' forecasts by increasing analysts' attention. Heterogeneity analysis reveals that the observed effect is more pronounced in companies with low information quality and those with star analysts. These findings not only objectively assess the impact of ESG rating disagreement, but also emphasise the crucial role of analysts in improving the capital market information environment.

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Details

Published: Dec 17, 2024
Vol/Issue: 30(4)
Pages: 3744-3760
License: View

Authors

M

Menghan Li

School of Business Zhengzhou University Zhengzhou China

Q

Qi Chen

School of Business Zhengzhou University Zhengzhou China

Cite This Article

Menghan Li, Qi Chen (2024). ESG Rating Disagreement and the Quality of Analysts' Forecasts: Information or Noise. International Journal of Finance & Economics, 30(4), 3744-3760. https://doi.org/10.1002/ijfe.3089

ESG Rating Disagreement and the Quality of Analysts' Forecasts: Information or Noise

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