The Impact of ESG Disclosure Quality on Corporate Cost of Capital and Financial Performance: Panel Evidence from Asian Manufacturing Firms

This paper investigates the empirical relationship between Environmental, Social, and Governance (ESG) disclosure quality, corporate cost of capital, and firm financial performance among publicly listed manufacturing firms across East and South Asia. Utilizing a comprehensive panel dataset of 850 firms over the period 2013–2023 (9,350 firm-year observations), we estimate fixed-effects panel regressions and System Generalized Method of Moments (GMM) dynamic specifications. The empirical results demonstrate that higher ESG disclosure scores substantially reduce the Weighted Average Cost of Capital (WACC) and cost of debt, with a 10-point increase in ESG disclosure corresponding to a 48 basis point reduction in WACC. Environmental (E) disclosure exerts the strongest dampening effect on debt capital costs in heavy industry sectors. Furthermore, two-stage mediation models confirm that capital cost reductions serve as a primary mechanism transmitting ESG transparency into elevated firm value (Tobin's Q). The findings provide vital strategic imperatives for corporate financial managers and regulators in emerging Asian markets.