ESG disclosure and cost of finance: the moderating role of managerial ownership

Purpose: This study aims to explore the effect of environmental, social and governance (ESG) disclosure on the cost of finance (debt and equity) and further investigates contextual factors that might influence this relationship. Design/methodology/approach: The study analyzes data from 300 nonfinancial firms listed on Next – 11 stock exchanges from 2015 to 2021. It uses panel data estimation techniques for robustness checks, including the fixed effect model, moment quantile regression methods and feasible generalized least square estimation. Findings: The study finds a significant negative relationship between ESG practices and the cost of finance, highlighting a curvilinear moderating effect of managerial ownership. This suggests that ESG disclosure not only enhances firm value and reduces the cost of finance by improving disclosure quality and addressing stakeholder concerns but also alleviates financing constraints. Originality/value: This study represents one of the initial endeavors to investigate the influence of ESG disclosure on the financial expenses (debt, equity) in N11 nations, to the extent of the authors’ knowledge. The research presents novel evidence on the curvilinear moderating impact of managerial ownership on these connections in emerging economies.