The Impact of ESG Rating Discrepancies on Investor Decision-Making: A Comprehensive Analysis Based on Behavioral Finance Theory
DOI:
https://doi.org/10.54097/wr26fk92Keywords:
ESG Rating Discrepancies, risk perception, sentiment swing, decision heterogeneity, market performance.Abstract
Prompted by the rapid development of ESG (including environmental, Social and Governance) investment, ESG ratings are coming into sight as an indispensable reference for investment decision-making. But the rating of the same firm by different rating agencies can differ a lot, which aggravate the adverse selection problems of investors. This paper examines how ESG rating deviation affects investor decision making behavior and changes the investment decision making logic through investor risk perception, sentiment swing, decision heterogeneity and market performance. Empirical study proves that the rating differences increase the stock market fluctuation, and has a certain impact on the market stability and the management's strategic adjustment. Lastly, this paper concludes with future research directions and recommends further investigating the responses of various investors for better transparency and uniformity of the rating model.
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