Title of Paper:ESG Rating Divergence: Cost of Digital Finance

Journal:International Review of Financial Analysis,2026

Key Words:We examine the relationship between digital finance and ESG divergence over 2011–2022 in China. Our findings indicate that higher digital finance levels are associated with increased ESG divergence. This finding remains robust after a series of endogeneity and robustness checks, including two-stage least squares, propensity score matching, alternative measures of digital finance and ESG divergence. The mechanism analysis provides suggestive evidence that heightened market attention, especially ESG-controversy-related attention, and reduced information transparency may be associated with the positive relationship between digital finance and ESG rating divergence by increasing information overload and making ESG-related information harder for rating agencies to interpret consistently. The relation is more pronounced in SOEs, firms with higher institutional ownership, weaker financial supervision, and operating in less-polluted industries. These insights underscore the need for regulatory frameworks that promote better ESG reporting, enabling investors to navigate rating discrepancies in an increasingly digital financial landscape.

Document Code:105245

Volume:117

DOI Number:10.1016/j.irfa.2026.105245

Translation or Not:No

Included Journals:SSCI