<scp>ESG</scp> Disclosure and the Cost of Capital Under Institutional Transformation: Evidence From Saudi Arabia's Vision 2030 Agenda for Sustainable Development

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🔬研究者:Provides evidence that ESG disclosure reduces cost of capital in emerging markets, and that national reform and firm disclosure act as partial substitutes, informing institutional theory and sustainable finance.

🏢実務担当者:For corporate sustainability teams, the findings suggest that incremental ESG disclosure is most valuable in low-transparency settings, and that systemic reforms can lower overall financing costs, potentially reducing the marginal benefit of disclosure.

🏛政策担当者:Policymakers can infer that national sustainability agendas can lower the cost of capital for all firms, but may reduce the impact of firm-level disclosure, implying a need to calibrate disclosure mandates accordingly.

ABSTRACT Whether the financial rewards of environmental, social, and governance (ESG) disclosure documented in developed markets extend to economies that are still constructing their sustainability infrastructure remains an open and theoretically consequential question. This study addresses that question by examining how ESG disclosure relates to the weighted average cost of capital (WACC) among Saudi Arabian listed firms, and whether the Saudi Vision 2030 reform agenda conditions this relationship. Drawing on an unbalanced panel of 52 noAUTHn‐financial firms and 335 firm‐year observations spanning 2011–2022—a window that brackets the 2016 launch of Vision 2030—and estimating firm‐, year‐, and industry‐fixed‐effects models complemented by lagged‐disclosure specifications and disaggregated cost‐of‐capital channels, we find a robust negative association between ESG disclosure and WACC. The effect operates through both the equity and debt channels and is economically larger for firms with below‐average disclosure, consistent with a marginal‐legitimacy mechanism in which incremental transparency is most informative where information gaps are widest. The interaction between ESG disclosure and the post‐Vision 2030 period is statistically insignificant, even though the reform indicator itself is associated with a lower WACC. We interpret this configuration through an institutional‐substitution logic: system‐level reform lowers the level of financing costs by raising the credibility floor for all firms, while leaving the marginal pricing of firm‐specific disclosure largely unchanged. The study contributes to the sustainable‐finance and institutional‐theory literatures by showing that national reform agendas and firm‐level transparency are partial substitutes rather than complements in shaping financing costs, and it offers policymakers and managers evidence that the capital‐market value of disclosure is greatest precisely where credibility is scarcest.

• openalex https://doi.org/10.1002/sd.71439first seen 2026-07-18 06:08:55