Institutional shareholders’ geographical concentration, coordinated governance effects, and ESG rating disagreement

Drawing on agency theory, this study explores how the geographical distribution of institutional shareholders affects corporate ESG rating disagreements. A higher geographical concentration of institutional shareholders is found to correlate with reduced ESG rating disagreements, as concentration supports coordinated governance and enhances ESG disclosure quality. Heterogeneity analyses show that this effect of geographical concentration is more pronounced in environments with higher competition among institutional shareholders and less media attention toward ESG issues. Analysis of economic consequences indicates that reducing ESG rating disagreements enhances stock liquidity. This study offers important insights regarding how coordinated governance among institutional shareholders can improve corporate ESG performance and optimize governance structures. The findings have practical implications for promoting shareholder collaboration to enhance capital market efficiency and support sustainable development.