The moderating role of audit quality in the relationship between ESG practices and the cost of capital: Evidence from the United Kingdom

IF 7.1 2区经济学 Q1 BUSINESS, FINANCE

Borsa Istanbul Review Pub Date : 2025-06-23 DOI:10.1016/j.bir.2025.06.007

Saddam A. Hazaea , Chun Cai , Saleh F.A. Khatib , Mohammed Hael

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Abstract

This study investigates the impact of environmental, social, and governance (ESG) performance on the cost of capital, using a sample of 406 non-financial companies in the United Kingdom from 2014 to 2023. We examined how ESG performance and audit quality influence the cost of equity (CoE), cost of debt (CoD), and weighted average cost of capital (WACC). The findings reveal a significant negative relationship between ESG performance and all three measures, indicating that strong ESG practices can reduce financing costs. Additionally, higher audit fees are positively associated with WACC and CoE, with a particularly pronounced effect on CoD. Engagement with Big 4 auditors moderates these relationships. Overall, the results demonstrate that ESG performance not only enhances corporate reputation and sustainability but also delivers financial advantages by lowering the cost of capital. These insights have significant implications for corporate financing decisions and provide guidance for managers, investors, policymakers, regulators, and government entities.

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审计质量在ESG实践与资本成本关系中的调节作用：来自英国的证据

本研究调查了环境、社会和治理（ESG）绩效对资本成本的影响，使用了2014年至2023年英国406家非金融公司的样本。我们研究了ESG绩效和审计质量如何影响股本成本（CoE）、债务成本（CoD）和加权平均资本成本（WACC）。研究结果显示，ESG绩效与这三项指标之间存在显著的负相关关系，表明强有力的ESG实践可以降低融资成本。此外，较高的审计费用与WACC和CoE呈正相关，对CoD的影响尤为显著。与四大会计师事务所的合作缓和了这些关系。总体而言，结果表明，ESG绩效不仅提高了企业的声誉和可持续性，而且通过降低资金成本提供了财务优势。这些见解对企业融资决策具有重要意义，并为管理者、投资者、政策制定者、监管机构和政府实体提供指导。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Borsa Istanbul Review Multiple-

CiteScore

7.60

自引率

3.80%

发文量

130

审稿时长

26 days

期刊介绍： Peer Review under the responsibility of Borsa İstanbul Anonim Sirketi. Borsa İstanbul Review provides a scholarly platform for empirical financial studies including but not limited to financial markets and institutions, financial economics, investor behavior, financial centers and market structures, corporate finance, recent economic and financial trends. Micro and macro data applications and comparative studies are welcome. Country coverage includes advanced, emerging and developing economies. In particular, we would like to publish empirical papers with significant policy implications and encourage submissions in the following areas: Research Topics: • Investments and Portfolio Management • Behavioral Finance • Financial Markets and Institutions • Market Microstructure • Islamic Finance • Financial Risk Management • Valuation • Capital Markets Governance • Financial Regulations