1. Introduction
The global embrace of ESG principles reflects a fundamental shift in how businesses define value creation [
1]. By aligning operations with sustainable development goals, companies transform into catalysts for the low-carbon transition while building long-term resilience [
2,
3]. This paradigm shift has elevated ESG considerations from peripheral concerns to core business imperatives, evidenced by the exponential growth of responsible investment frameworks worldwide. Investors, consumers and regulators now systematically integrate ESG metrics into decision-making processes, creating an urgent need for standardized performance evaluation [
1,
4]. It is this convergence of market demand and methodological complexity that gave rise to ESG evaluation [
2,
4,
5]. However, ESG rating agencies employ divergent data sources and methodologies, leading to significant discrepancies in ESG evaluations among providers [
4,
6,
7]. Such divergence in ESG evaluation reflects the uncertainty of the firm’s sustainable development, deteriorates its information environment, and brings negative economic consequences [
8,
9]. For example, some studies find divergent ESG evaluations lead to reduced equity and debt financing and increased financing costs [
2,
10,
11,
12]. Regarding the effects of Divergent ESG evaluations on firms’ external financing, existing studies predominantly focus on capital market financing, while limited attention has been paid to financing within supply chains, which relies not only on credit risk assessments but also on trust between supply chain partners [
13,
14].
As an important informal financing mechanism for a firm, supply chain financing offers advantages such as lower costs and reduced information asymmetry compared with traditional bank loans and equity financing [
15]. Especially in China’s financial market, pervasive credit rationing restricts firms’ access to sufficient external financing, prompting reliance on supply chain financing as an effective alternative to sustain operations and growth [
16]. Prior studies examine determinants of supply chain financing, including governance characteristics (e.g., managerial attributes) and external factors (e.g., disclosure quality, cultural norms) [
14,
17,
18,
19,
20]. In addition, prior research explores the relationship between ESG and supply chain financing [
21,
22,
23], but the findings remain inconsistent. Research suggests that ESG disclosures complement financial information by reducing information asymmetry [
24], while strong ESG performance signals sustainability and lowers operational risks, facilitating supply chain financing access. On the other hand, firms engaging in ESG activities may reflect managerial opportunism due to agency problems However, the instrumental use of ESG practices may engender adverse effects, wherein executives leverage ESG initiatives to entrench their control while concealing operational inefficiencies and financial irregularities, thereby exacerbating agency costs and harming operational performance [
25], which undermines the access to supply chain financing.
Notably, a critical oversight in prior research lies in the chronological accessibility of ESG evaluation data. To illustrate, although Sino-Securities Index Information Service retroactively assigned ESG ratings to 2009, its formal ESG scoring framework was only established in 2017. Consequently, stakeholders lacked access to these metrics for assessing corporate ESG performance prior to 2017, rendering pre-2017 analyses immaterial to real-world supply chain financing choices. Our study addresses this issue by excluding the Sino-Securities Index Information Service’s pre-2017 ratings to test its real impact. Furthermore, existing research predominantly relies on a single rating agency, ignoring the pervasive impact of divergent ESG evaluations on corporate supply chain financing. Theoretically, multiple ratings should provide incremental information, thus providing useful information for stakeholder decision-making [
4,
26]. However, under persistent divergence, divergent ESG evaluations exacerbate information asymmetry and operational uncertainty [
8,
9]. Whether the upstream and downstream supply chain partners react to divergent ESG evaluations in supply chain financing decisions remains underexplored. Accordingly, we investigate the effect of divergent ESG evaluations on corporate supply chain financing to fill this gap.
Three motivations drive our focus on China. First, China’s ESG rating market, emerging post-2015, exhibits greater rating divergence than developed markets, offering an ideal setting to examine ESG rating consequences [
27]. Second, as a major global economy, Chinese firms face acute financing constraints during economic transformation, which have been a key factor restricting the high-quality development of firms [
28,
29,
30]. Analyzing the financing behaviors of Chinese firms reveals the problems in the process of economic transformation. Third, China’s less-developed financial system may amplify the adverse effects of divergent ESG evaluations. In emerging markets like China, supply chain financing often plays a more significant role than bank loans in supporting corporate activities [
31]. Exploring how Chinese firms cope with the negative effect of divergent ESG evaluations on financing will provide valuable insights for sustainable development on a global scale.
Drawing on 2016–2022 data from China’s A-share market, the paper examines the linkage between divergent ESG evaluations and corporate supply chain financing. We found that divergent ESG evaluations significantly limit firms’ ability to obtain supply chain financing, which is robust to various tests. Further analysis reveals that divergence increases information asymmetry, operational risks, and reputational damage, affecting the risk perception and trust level of firms upstream and downstream in supply networks. Heterogeneity tests indicate that the adverse impact becomes stronger in firms with poor corporate governance, lower regional trust levels, and high social ESG awareness. Additionally, divergence primarily reduces supply chain financing from suppliers, with no significant impact on advance payments from customers, suggesting asymmetric effects across supply chain tiers. Meanwhile, we find that divergence reduces supply chain financing from upstream suppliers and has no significant impact on advance payments from downstream customers, revealing an asymmetric contraction effect induced by ESG discrepancies.
Our research includes the following potential contributions: First, it extends the studies on divergent ESG evaluations by shifting focus from equity and debt financing in the capital markets to supply chain financing, which is an important form of external financing channels for firms [
2,
8,
10,
11,
12], advancing knowledge about how divergent ESG evaluations propagate through financing networks. Second, this paper enriches research on supply chain financing determinants by introducing third-party divergent evaluations. Current research predominantly investigates how corporate governance and external environment characteristics affect supply chain financing [
14,
17,
18,
19], whereas we empirically examine the role of third-party information intermediaries. Finally, this paper provides empirical evidence on whether multiple ratings generate incremental information or noise [
4,
26], offering theoretical support for standardizing ESG rating systems and thus mitigating the market distortions caused by divergent ESG evaluations.
We structure the paper as following sections:
Section 2 synthesizes prior literature and formulates testable hypotheses.
Section 3 elaborates on the research design and analytical methods.
Section 4 presents the core empirical results, while
Section 5 interprets these findings and offers concluding remarks.
5. Conclusion, Discussion, Implications, and Limitations
5.1. Conclusions
This study employs a sample of Chinese A-share listed firms and finds that divergent ESG evaluations significantly adverse corporate supply chain financing. The conclusion that divergent ESG evaluations exacerbate supply chain financing still holds after propensity score matching, instrumental variable testing of exogenous policies, and multiple robustness tests. The mechanism analyses reveal that divergence impairs supply chain financing by increasing information asymmetry, operational risks, and negative reputation. Specifically, divergent ESG evaluations have led to a decrease in analyst coverage for companies, as well as an increase in earnings volatility and negative media coverage. Heterogeneity analysis shows that higher governance quality and regional trust levels mitigate the negative impact of divergent ESG evaluations on supply chain financing. In addition, divergent ESG evaluations demonstrate a temporal learning effect, becoming more pronounced over time. Moreover, divergent ESG evaluations exert supply chain financing is asymmetric between upstream suppliers and downstream customers, mainly reducing supply chain financing provided by upstream suppliers. Furthermore, discrepancies in the sub-indicators of ESG have been shown to negatively impact supply chain financing, with governance discrepancies having the most significant effect. As a result, when firms face negative evaluations regarding these discrepancies, they often choose to enhance their governance capabilities.
5.2. Discussion
The foundational research by Berg et al. [
4] and Christensen et al. [
8] on rating methodology heterogeneity forms the theoretical cornerstone of this study. Their arguments reveal that the discrete nature of ESG assessment frameworks stems from methodological variations rather than substantive performance differences among firms. This conclusion directly validates the transmission pathway through which information asymmetry exacerbates supply chain financing constraints. Our study further incorporates the interaction analysis paradigm proposed by Attanasio et al. [
57]. Their empirical findings on how corporate environmental disclosure strategies trigger value transmission fractures provide theoretical grounding for explaining the micro-level mechanisms of supply chain trust attenuation. At the transmission mechanism level, unlike Wang et al. [
58] who focused on stock price volatility effects or Mio et al. [
12] who emphasized capital cost mechanisms, this study innovatively constructs a three-dimensional mediation model encompassing information transmission, operational risk, and reputation spillover. This model systematically elucidates the theoretical logic of supply chain networks responding to corporate uncertainties. By integrating these theoretical threads, this study not only verifies the unique network constraint effects in supply chain finance but also deeply analyzes the endogenous mechanisms through which core firms’ ESG controversies propagate nonlinearly along supply chains. These findings provide theoretical support for developing precise supply chain ESG collaborative governance frameworks.
5.3. Theoretical Implications
We uncover the underlying mechanisms through which divergent ESG evaluations constrain supply chain financing, offering significant practical and theoretical contributions to information asymmetry theory, prospect theory, and legitimacy theory.
5.3.1. Implications to Information Asymmetry Theory
This study examines the impact mechanism of divergent ESG evaluations on supply chain financing from the perspective of information asymmetry theory. While prior research predominantly focuses on information asymmetry arising from discrepancies in financial disclosures, this investigation delves into how inconsistencies in non-financial information, particularly ESG assessments, exacerbate information opacity within supply chains. The findings demonstrate that when market participants form divergent judgments regarding a firm’s sustainable development capabilities, information transmission efficiency is substantially impaired, thereby exerting material influence on financing decisions. This theoretical contribution extends the explanatory boundaries of information asymmetry theory into the domain of non-financial information.
5.3.2. Implications to Prospect Theory
Within the behavioral economics framework of prospect theory, the research systematically elucidates how divergent ESG evaluations shape risk perceptions among supply chain partners. The study reveals that disparities in ESG assessments trigger loss aversion among decision-makers, and even when corporate fundamentals remain stable, this psychological mechanism still intensifies financing constraints. Notably, enterprises at different nodes of the supply chain exhibit varying sensitivity to ESG divergence, a finding that provides crucial empirical support for the applicability of prospect theory in supply chain finance contexts.
5.3.3. Implications to Legitimacy Theory
From the standpoint of legitimacy theory, the research uncovers the corrosive effects of divergent ESG evaluations on corporate social legitimacy. When significant discrepancies exist among stakeholders’ evaluations of a firm’s sustainability performance, the organization’s social acceptance faces challenges that ultimately compromise its bargaining position in supply chain financing. The study further identifies that contextual factors including corporate governance quality and regional trust environments moderate this effect, indicating that legitimacy construction depends not only on corporate conduct but is also profoundly shaped by external institutional environments. These discoveries yield novel theoretical insights for the application of legitimacy theory within sustainable development contexts.
5.4. Practical Implications
This study advances the literature concerning the economic implications of divergent ESG evaluations and supply chain financing determinants, yielding actionable insights for regulators, enterprises, and supply chain participants. Specifically, Regulatory authorities should establish scientifically grounded and standardized ESG assessment frameworks that reconcile jurisdictional specificities with international benchmarks, particularly given evaluation discrepancies’ demonstrated amplification of information asymmetry, operational risks, and adverse media attention. Such frameworks would enhance metric consistency and cross-agency comparability across evaluation systems. For firms, increasing ESG investments and improving ESG performance are essential for achieving long-term sustainable development. Moreover, they should actively enhance the disclosure quality, as those with significant divergent ESG evaluations tend to have lower transparency, higher default risks, and poorer reputations.
Collectively, divergent ESG evaluations fundamentally undermine supply chain stability through distorted information efficiency and heightened operational risks. This systemic challenge demands coordinated reform among regulators, enterprises, and rating agencies to establish harmonized ESG evaluation frameworks. Such alignment is critical for bridging credibility deficits and securing sustainable green financing flows throughout value chains.
5.5. Limitations and Future Research
This investigation identifies two methodologically interconnected limitations requiring nuanced interpretation. Quantification of divergent ESG evaluations necessitates synchronized multi-source assessments. China’s pre-2016 ESG assessment environment lacked the institutional infrastructure to fulfill this prerequisite. Such temporal truncation constrains the observational scope and may obscure significant transitional patterns in China’s ESG institutionalization trajectory. Future maturation of rating ecosystems will enable longitudinal verification through extended temporal datasets. Regarding sample coverage, the limited inclusion of Chinese A-share companies by international ESG rating agencies presents a significant constraint, preventing this study from distinguishing between the differential effects of divergent ESG evaluations from international versus domestic rating agencies. Notably, as international agencies expand their coverage of Chinese listed firms, subsequent investigations will benefit from more comprehensive data foundations.