ESG Disclosure and Cost of Equity: Do Big 4 Audit Firms Matter?

Efficiency in the financial market helps firms and the economy through efficient capital allocation and improved capital productivity. ESG (environmental, social, and governance) disclosure provides nonfinancial information that reduces informational inefficiency in the financial market. India saw a major shift in ESG regulation in 2013–2014. This study examines the impact of ESG disclosure on the cost of equity after new regulation. Analyzing panel data from 586 firms (2015–2022), the key findings are: (a) superior ESG disclosure lowers the cost of equity mainly due to the governance component of ESG; (b) the presence of Big 4 auditors do not have a significant differential impact on the ESG-cost of equity relationship. JEL Codes: G30, M14, Q56