The Consequences of ESG Rating Divergence on Corporate Transparency and Disclosure Practices
DOI:
https://doi.org/10.61536/escalate.v4i02.476Keywords:
ESG Rating Divergence, Corporate Transparency, Disclosure Practices JEL Code : M41, M14, Q56Abstract
This study aims to examine the consequences of ESG rating divergence on corporate transparency and disclosure practices using a Systematic Literature Review (SLR) approach. Twenty papers that satisfy the inclusion criteria are identified, screened, and subjected to content analysis as part of the study's investigation of international journal articles published between 2022 and 2026 and indexed in Scopus, Sinta and Garuda. The findings show that variations in rating agencies' evaluation techniques, indicators, weighting schemes, and data sources lead to ESG rating divergence, which can lead to information confusion and impact investor views in the capital markets. In order to lessen information asymmetry and boost stakeholder trust, the literature demonstrates that variations in ESG ratings motivate businesses to strengthen disclosure policies and increase openness. Reducing rating inconsistencies is found to be mostly dependent on improved ESG reporting quality, more access to sustainability data, and more robust governance structures. Additionally, corporations are driven to improve sustainability disclosure and openness by external forces like market surveillance, regulatory rules, and stakeholder expectations. Overall, the results indicate that ESG rating divergence offers corporate reporting both opportunities and challenges. While rating discrepancies may raise uncertainty, they also encourage businesses to strengthen transparency, improve disclosure quality, and increase accountability in sustainability reporting practices.
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