(Press-News.org) An analysis published in the Journal of Accounting Research uncovers evidence that conflicts of interest arising from commercial ties lead to bias in environmental, social, and governance (ESG) ratings.
Investigators focused on Moody’s and S&P’s acquisitions of ESG rating agencies Vigeo Eiris and RobecoSAM. Their analysis revealed that after these ESG rating agencies were acquired by Moody’s and S&P, they issued higher ratings to existing paying clients of Moody’s and S&P. Specifically, after the acquisitions, the ESG ratings of existing credit rating clients of Moody’s and S&P increased by 17.16% of the standard deviation of the relative ESG rating.
The increase in ESG ratings after the acquisitions was more pronounced for firms with more intensive business relationships with Moody’s or S&P.
“Our findings highlight the need for regulation to address conflicts of interest in ESG rating agencies and for investors to be mindful of potential biases when relying on these ratings,” said senior author Liandong Zhang, PhD, of Singapore Management University.
URL upon publication: https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12582
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About the Journal
Journal of Accounting Research publishes original research in all areas of accounting and topics including finance, economics, statistics, psychology, and sociology. Research typically uses analytical, empirical archival, experimental, or field study methods. Questions pertain to information and measurement used in organizations, markets, governments, regulation and standards; often arising in financial reporting, disclosure, internal accounting, auditing, taxation, corporate governance, capital markets, law, contracting, and with respect to the accounting profession.
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Do commercial ties influence ESG ratings?
2024-11-06
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In your coverage, please use this URL to provide access to the freely available paper in PLOS Biology: http://journals.plos.org/plosbiology/article?id=10.1371/journal.pbio.3002870
Article Title: Biomedical researchers’ perspectives on the reproducibility of research
Author Countries: Canada, Australia, United States
Funding: The author(s) received no specific funding for this work. END ...