Capital market liberalization and corporate ESG rating divergence: a quasi-natural experiment based on the trading system of SSHC

Utilizing the Shanghai-Shenzhen-Hong Kong Stock Connect trading system as a quasi-natural experiment, we examine the impact of capital market liberalization on corporate ESG rating divergence and its underlying mechanisms through a staggered difference-in-differences (DID) model. Our results demonstrate that capital market liberalization significantly heightens ESG rating divergence among the target firms. Mechanism tests reveal that this effect is primarily driven by increased corporate ESG disclosure and heightened scrutiny from domestic and foreign rating agencies. Heterogeneity analysis indicates that the impact is more significant for firms with lower media attention, reduced market competition, and minimal influence from offshore business philosophies. These findings offer empirical evidence supporting further efforts to promote economic and environmental sustainability.