The Impact of ESG Rating Disagreement on Corporate Philanthropy

Abstract

Drawing on a sample of A-share listed firms in China from 2011 to 2023, this study examines the impact of ESG rating disagreement on corporate philanthropy. We find that firms with higher ESG rating disagreement are more likely to increase charitable donations in the subsequent year. Mechanism analyses indicate that this effect operates through both operational and reputational risks. Heterogeneity analyses show that the effect is more pronounced for firms facing higher performance pressure, lower business diversification, weaker market status, higher advertising expenditures, closer consumer proximity, or operating in non-heavily polluting industries. Additional analysis shows that social rating disagreement is the primary driver of philanthropic contributions. Economic consequence analysis demonstrates that ESG-induced philanthropy alleviates financing constraints. The study contributes to the literature on the economic consequences of ESG rating disagreement, emphasizes the context-dependent nature of managerial decisions under information uncertainty, and highlights their economic value. It provides insights for regulators, firms, and investors in interpreting corporate ESG behavior, helps market participants better understand corporate philanthropy, and offers useful implications for addressing ESG rating disagreement.