The Effect Of Environmental Social And Governance Performance Factors On Cost Of Debit: Southeast Asia Evidence

Abstract

The importance of Environmental, Social, and Governance concerns is rising economic environment. Even though debt is a crucial financial instrument for Southeast Asian businesses, there hasn't been as much research on how ESG scores affects debt financing and associated expenses as there has been on the impact on company performance and profitability. The effect of ESG scores on COD for companies in five Southeast Asian nations is examined in this study. Based on 1,130 observations findings spanning from 2013 to 2022, the author concludes that social responsibility and all ESG scores are statistically significant negative. Using a variety of estimate techniques, including OLS, FEM, REM, GLS, and GMM model, the study findings are quite reliable. As a result, ASEAN companies with higher ESG scores have lower debt costs. When comparing the ESG index to earlier research, the social component has a notably detrimental effect on debt costs. Furthermore, this study demonstrates a negative correlation between the cost of debt and social and governance scores. These results imply that when making financing decisions, creditors also give careful consideration to a company's standing in the community and the reliability of its management team. All things considered, this study's findings support the theoretical data suggesting that socially conscious actions help to reduce agency issues and raise corporate transparency, which in turn lowers the COD for companies business ventures