More Consistency, Less Disagreement: Temporal and Interdomain <scp>ESG</scp> Consistency as Rating Anchors

ABSTRACT The widespread adoption of environmental, social, and governance (ESG) ratings has sparked increased concern about the potential adverse impact of rating disagreement, but it remains unclear how companies resolve the disagreement. Using a sample of Chinese A‐share listed companies rated by Sino‐Securities (Sino), Wind, and Bloomberg from 2018 to 2021, we explore whether corporate ESG consistency affects ESG rating disagreement. The results indicate that both temporal and interdomain consistency of ESG reporting reduces ESG rating disagreement. Further, the effect of corporate ESG consistency on ESG rating disagreement is more substantial in ESG‐sensitive industries, cross‐listed firms, and firms with high media attention. While temporal consistency reduces ESG rating disagreement across the firm life cycle, interdomain consistency reduces disagreement only during the growth and maturity phases. Finally, ESG rating disagreement decreases corporate value and increases the volatility of future stock returns, analyst forecast dispersion, and turnover rates. The paper contributes to the extant literature on predictors of ESG rating disagreement, thereby providing practical implications for firms seeking to resolve such disagreements.