The role of common ownership in shaping ESG rating uncertainty: A collaborative governance perspective across time horizons

Abstract

This study integrates ESG considerations into the production decision-making model and empirically examines the relationship between common ownership and ESG rating uncertainty from a collaborative governance perspective. The analysis uses data from China's listed enterprises spanning from 2000 to 2023. The findings suggest that, the presence of common ownership reduces the uncertainty surrounding ESG factors for enterprises, indicating a collaborative governance effect that alleviates fluctuations in ESG performance and lightens overall ESG rating uncertainty. Mechanism analysis reveals how common ownership enhances enterprises' market power, amplifies the collaborative governance effect, and consequently lessens ESG rating uncertainty. Among common ownership, short-term, pressure-resistant, and domestic common ownership exert a more significant influence on ESG rating uncertainty. Among listed firms, common ownership has a greater impact on ESG rating uncertainty in those with lower environmental disclosure, higher media scrutiny, and those that are larger or privately owned. Regarding the rating uncertainties of ESG sub-items, the impact of common ownership on the rating uncertainty of the three factors—E, S, and G—is significant and similar in magnitude.