The Impact of ESG Rating Divergence on Stock Price Synchronicity: Unraveling the Mediating Role of Analyst Dispersion

Yiyi Dai

doi:10.54691/dvhgb840

Authors

Yiyi Dai School of International Economica and Finance, Shanghai International Studies University, Shanghai, China

DOI:

https://doi.org/10.54691/dvhgb840

Keywords:

ESG Divergence; Stock Price Synchronicity; Analyst Dispersion.

Abstract

Based on the sample of A-shared listed companies in China’s Shanghai and Shenzhen stock markets from 2018 to 2023, this paper employs data of the ESG rating from five agencies. It empirically explores how divergence in the ESG ratings influences the stock price synchronicity, with analyst dispersion serving as the mediating factors in the relationship .The estimation outcomes reveal that greater divergence across ESG ratings will lead to a significant increase in the stock price synchronicity. As information intermediaries, analysts can effectively alleviate the noise caused bu divergent ESG ratings, thus exerting a masking effect. The mechanism test indicates that the reduction in stock turnover is also an essential transmission channel through which divergence of ESG ratings excert an impact on the stock price synchronicity. Heterogeneity analysis shows that information environment and market attention constitute a crucial part in the delivery and transmission of ESG information. The paper highlights the necessity of developing an integrated and standardized ESG rating system. Meanwhile, it is necessary to guide the standardized development of the analyst industry, strengthen its role as an information intermediary in order to enhance the efficiency of the capital market.

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