Environment, Social, and Governance (ESG) disclosure is a non-financial disclosure that is expected to enhance firms’ transparency, ease estimation of risk, hence lower cost of equity (CoE). However prior studies show mixed results. Using Institutional theory, this paper argues that sustainability policy intervention could have a different effect. However, this framework expects that the more ESG disclosure, the higher firms’ cost of equity (CoE) due to shareholders’ perception of mindless ESG plan. The policy intervention examined is government regulation of mandatory sustainability practices. This study uses a sample of 98 basic materials sector companies in eleven Asia countries with 5 years study period from 2017-2021 as a research sample. Using panel-data regression analysis, this study finds that there is a positive relationship between ESG scores and CoE. Moreover, the government policy strengthens such a relationship. Therefore, consistent with coercive mechanism in institutional theory, we conclude that mandatory sustainability disclosure in the Asian Basic material sector companies in-creases firms’ CoE and the existence of mandatory regulation strengthens such a relationship.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.