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Corporate governance and environmental, social, and governance (ESG) disclosure and its effect on the cost of capital in emerging market

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Abstract

The objective of this research is to investigate the effects of corporate governance scores and environmental, social, and governance scores (ESG) on firms’ cost of capital in emerging countries. The sample consists of 800 firm-year observations collected from Thomson Reuters. We analyze the data using panel-corrected standard errors (PCSE) regressions, which correct for heteroskedasticity issues and contemporaneous errors in the data. When moderated with emerging market variable, our findings indicate that in the financial sector, corporate governance and ESG score is negatively associated with cost of capital. Nonetheless, in the nonfinancial sector, no evidence is found on the effect of corporate governance and ESG on cost of capital. Our findings indicate that emerging countries, different institutional, ownership, and legal structural has an effect on corporate governance and ESG implementation.

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Authors and Affiliations

  1. Nottingham University Business School (NUBS), 43500, Semenyih, Selangor Darul Ehsan, Malaysia

    Wan Masliza Wan Mohammad

  2. Nilai University, 71800, Negeri Sembilan, Nilai, Malaysia

    Muzaini Osman & Mimi Suriaty Abdul Rani

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  1. Wan Masliza Wan Mohammad
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  2. Muzaini Osman
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  3. Mimi Suriaty Abdul Rani
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Correspondence to Wan Masliza Wan Mohammad.

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Mohammad, W.M.W., Osman, M. & Rani, M.S.A. Corporate governance and environmental, social, and governance (ESG) disclosure and its effect on the cost of capital in emerging market. Asian J Bus Ethics 12, 175–191 (2023). https://doi.org/10.1007/s13520-023-00169-2

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