Parent-subsidiary dispersion and ESG rating disparities: evidence from China
研究中国上市公司2009-2022年数据发现，母子公司地理和制度距离越大，不同机构对同一公司的ESG评级分歧越小，机制涉及评级机构的认知决策和声誉顾虑。
This study examines how geographic and institutional distances between parent and subsidiary companies impact environmental, social, and governance (ESG) rating disparities, defined as the inconsistency in ESG ratings for the same company across different ESG rating agencies. Specifically, focusing on these agencies’ cognitive decision-making processes, we analyse a sample of Chinese listed companies between 2009 and 2022 and find that greater parent-subsidiary dispersion is associated with smaller ESG rating disparities. We identify two mechanisms influencing raters’ decisions: the peripheral route, as described by dual-process theory, and reputation concern, which leads to centrality bias. A double difference-in-differences design and instrumental variable approach enhance our causal inference. Cross-sectional analyses reveal that the negative relationship between parent-subsidiary dispersion and ESG rating disparities is weakened by factors such as corporate digital transformation, high-speed rail connectivity, and sufficient internal funding. Our findings provide novel insights into the determinants of ESG rating disparities by exploring the cognitive processes underlying rating decisions and offer important implications for companies managing their corporate structures and expansion strategies, and rating agencies refining their assessment methodologies.