Bridging the credibility gap: sustainability assurance, corporate transparency and debt costs in China

Voluntary sustainability assurance may enhance disclosure credibility, yet its financing relevance in emerging markets remains uncertain. Drawing on signalling, agency, and legitimacy theories, this study examines whether corporate transparency helps explain the association between sustainability assurance and the cost of debt in China. Using 21,694 firm-year observations from Chinese A-share listed firms during 2019–2024, we find no significant total association between assurance adoption and the cost of debt. Assurance adoption is, however, positively associated with corporate transparency, while transparency is negatively associated with debt costs. A firm-level cluster-bootstrap analysis with 5000 replications estimates an indirect association of −0.0009, with a bias-corrected 95% confidence interval of [−0.0014, −0.0005]. One-year-ahead specifications, propensity score matching, and a randomization-based placebo test provide sensitivity evidence but do not eliminate endogeneity concerns. An alternative analysis using the Huazheng ESG rating yields a similar indirect pattern; this measure is interpreted as an external ESG rating rather than a direct measure of sustainability performance. The findings suggest that the financing relevance of sustainability assurance may operate through observable information-related outcomes accompanying adoption. Given the low rate of assurance adoption and the observational research design, the results should be interpreted as conditional associations rather than causal effects.