The impact of environmental, social, and governance ratings on corporate innovation: From the perspective of informal institutions.

The significance of rating events in capital markets has garnered considerable attention from investors, experts, and academics, with third‐party rating agencies being one of the topics. We focus on the impact of environmental, social, and governance (ESG) ratings on corporate innovation and confirm a positive relationship. We also believe that ESG ratings play a governance role as informal institutions in stimulating corporate innovation. The efficacy of ESG ratings in promoting corporate innovation is dependent on a favorable information environment that is devoid of negative influences. We confirm the synergistic effect of ESG ratings with other informal institutions and the substitution effect with formal institutions. [ABSTRACT FROM AUTHOR]