The impact of ESG ratings on analysts’ information processing: Evidence from China

Abstract

Based on data from Chinese A-share listed companies from 2009 to 2022, this study explores the relationship between ESG external ratings and analyst attention by quantifying the weight that analysts place on old information when releasing financial performance forecasts. The study found that analysts’ limited attention can cause them to ignore some of the latest financial information, while higher ESG external ratings significantly increase the speed at which analysts integrate the latest financial information. In addition, for companies that frequently release negative news, analysts are more sensitive to ESG ratings. These results reveal the important impact of ESG ratings, as independent and concise non-financial information, on analysts’ information processing behaviour, especially in companies with frequent negative news, where the role of ESG ratings is more prominent.