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ESG Disclosure and Cost of Equity: Do Big 4 Audit Firms Matter?

Author

Listed:
  • Nidhin Mathath
  • Vinod Kumar
  • G. Balasubramanian

Abstract

Efficiency in the financial market helps firms and the economy through efficient capital allocation and improved capital productivity. ESG (environmental, social, and governance) disclosure provides nonfinancial information that reduces informational inefficiency in the financial market. India saw a major shift in ESG regulation in 2013–2014. This study examines the impact of ESG disclosure on the cost of equity after new regulation. Analyzing panel data from 586 firms (2015–2022), the key findings are: (a) superior ESG disclosure lowers the cost of equity mainly due to the governance component of ESG; (b) the presence of Big 4 auditors do not have a significant differential impact on the ESG-cost of equity relationship. JEL Codes: G30, M14, Q56

Suggested Citation

  • Nidhin Mathath & Vinod Kumar & G. Balasubramanian, 2025. "ESG Disclosure and Cost of Equity: Do Big 4 Audit Firms Matter?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 24(1), pages 87-108, March.
    • Handle: RePEc:sae:emffin:v:24:y:2025:i:1:p:87-108
    DOI: 10.1177/09726527241280017
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    More about this item

    Keywords

    Sustainability; information asymmetry; cost of capital; audit quality;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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