ESG rating disagreement and corporate digital transformation

• The relationship between ESG rating disagreement and corporate digital transformation is examined. • High ESG rating disagreement is associated with low corporate digital transformation. • Technological innovation and financing constraint are two mechanisms in this relationship. Despite the increasing focus on environmental, social, and governance (ESG) factors, discrepancies in ratings are weighing on a company's stakeholders. Based on the hypothesis of information asymmetry, this study uses Chinese A-share listed companies from 2010 to 2023 to examine how ESG rating disagreement impacts corporate digital transformation (CDT). Empirical results show that ESG rating discrepancy is associated with lower CDT, with technical innovation and financing constraints being the two mechanisms. When testing alternative approaches, including the alternative of CDT, propensity scoring matching and Heckman's two-stage model, the findings remain robust. The findings have policy implications for encouraging companies to disclose their ESG information in the context of digital economy.