Effect of ESG performance on the cost of equity capital: Evidence from China

The purpose of this paper is to evaluate the influence of environmental protection, social responsibility and corporate governance (ESG) performance on the cost of equity (COE) capital of Chinese A-Share companies between 2010 and 2020. Benchmark analysis discovers that ESG performance can significantly reduce the cost of equity capital of listed companies, which is robust even when heteroscedasticity, sequence correlation and cross-section correlation are controlled, respectively, or simultaneously. Mediating effects are discovered that ESG can, not only directly, but also indirectly reduce the cost of equity capital by reducing the market risk of enterprises and the increasing of their equity diversification.