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The Valuation Channel of Corporate Social Responsibility in Emerging Markets: Evidence from the Cost of Equity

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  • Richard Paul Gregory

Abstract

I examine the effects of ESG policies on the cost of equity for emerging markets controlling for Political Risk and data reliability. I find that firms in emerging market countries with relatively high political risk do not benefit from social and governance ESG activities as they lead to a higher cost of equity. This is presumably due to potential or actual political conflicts with the host government. On the other hand, environmental activities do lower the cost of equity as the measured environmental activities are internal to the firms. For emerging market firms in countries with low political risk, all ESG activities are associated with a lower cost of equity.

Suggested Citation

  • Richard Paul Gregory, 2023. "The Valuation Channel of Corporate Social Responsibility in Emerging Markets: Evidence from the Cost of Equity," Journal of Business Administration Research, Journal of Business Administration Research, Sciedu Press, vol. 12(2), pages 29-44, October.
    • Handle: RePEc:jfr:jbar11:v:12:y:2023:i:2:p:29-44
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    References listed on IDEAS

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    1. Dan Dhaliwal & Shane Heitzman & Oliver Zhen Li, 2006. "Taxes, Leverage, and the Cost of Equity Capital," Journal of Accounting Research, Wiley Blackwell, vol. 44(4), pages 691-723, September.
    2. Saad, Mohsen & Samet, Anis, 2017. "Liquidity and the implied cost of equity capital," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 15-38.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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