ESG Rating Disagreement and Corporate Total Factor Productivity:Inference and Prediction

TL;DR

This study investigates how ESG rating disagreement impacts corporate total factor productivity in Chinese firms, revealing that higher disagreement reduces productivity through increased financing constraints and weakened human capital, with predictive modeling confirming its significance.

Contribution

It provides new empirical evidence on the negative effect of ESG rating disagreement on TFP and introduces an XGBoost model to predict TFP considering Dis.

Findings

Dis reduces TFP, especially in certain firm types.

Green innovation amplifies Dis's negative impact on TFP.

Dis significantly improves TFP prediction accuracy.

Abstract

This paper examines how ESG rating disagreement (Dis) affects corporate total factor productivity (TFP) in China based on data of A-share listed companies from 2015 to 2022. We find that Dis reduces TFP, especially in state-owned, non-capital-intensive, low-pollution and high-tech firms, green innovation strengthens the dampening effect of Dis on TFP, and that Dis lowers corporate TFP by increasing financing constraints and weakening human capital. Furthermore, XGBoost regression demonstrates that Dis plays a significant role in predicting TFP, with SHAP showing that the dampening effect of ESG rating disagreement on TFP is still pronounced in firms with large Dis values.