Ownership concentration, sustainability practices, and cost of debt: Evidence from ASEAN countries

Abstract

This study examines the effect of ownership concentration on sustainability practices and the cost of debt. Subsequently, this study examines whether the performance of sustainability practices influences the cost of debt of public listed companies in three ASEAN countries. This study performed a content analysis on the annual reports of 93 public listed companies in Singapore, Malaysia, and Indonesia. The data analysis showed that ownership concentration has a significant negative effect on the cost of debt but no significant effect on sustainability practices. It also showed that there is a significant negative effect of sustainability practices on the cost of debt. Such findings could be attributed to the differences in business relationships between investors and companies and the non-linear relationship between ownership concentration and sustainability practices. This study provides evidence that both ownership concentration and sustainability practices negatively affect the cost of debt of the public listed companies. From the findings, it is recommended that public listed companies should refocus and strategize ways to mitigate the negative effect of ownership concentration and sustainability practices on the cost of debt, particularly in developing countries.