The Impact of ESG Rating Divergence on Stock Liquidity: Evidence from the Chinese Capital Market

Against the backdrop of global sustainable development and the rise of ESG investing, the significant divergence in ESG ratings in China’s capital market exacerbates information asymmetry, potentially suppressing stock liquidity and undermining market efficiency. This paper examines 712 A-share listed companies from 2019 to 2023, constructs an ESG divergence index by integrating data from four major rating agencies, and employs a two-way fixed effects model and instrumental variable approach to analyze its relationship with stock liquidity. The findings reveal that increased ESG rating divergence significantly inhibits stock liquidity, with more pronounced effects on firms characterized by a higher total number of shareholders, higher turnover rates, and lower profitability. Further analysis identifies that ESG rating divergence suppresses stock liquidity primarily by dampening investor sentiment. This study provides empirical support for optimizing ESG rating standards and enhancing corporate information disclosure, offering regulatory insights for firms with dispersed ownership and weak profitability. The conclusions hold reference value for China and similar emerging markets.