ESG Disclosure Quality, Cost of Capital and Financial Performance: Evidence from Indian Listed Firms

Environmental, Social and Governance (ESG) disclosure has become a vital segment of corporate transparency, sustainable finance and investment decision-making. The recent advent of Business Responsibility and Sustainability Reporting (BRSR) by Securities and Exchange Board of India (SEBI) has enabled the institutional structure of sustainability reporting to be strengthened for listed firms. However, the economic implications of ESG disclosure quality have been noted as an area of research interest, especially in terms of firms’ financing costs and financial performance. The present research proposes to empirically analyse the relationship between ESG disclosure quality, cost of capital and financial performance for Indian listed firms through secondary data. Drawing on stakeholder, legitimacy, signalling and information-asymmetry theories, the study puts forth a framework where quality ESG disclosure can help enhance transparency, diminish risk and enhance stakeholder confidence. The present research intends to use a firm-year panel data set (2018-19 to 2024-25) (subject to data availability), along with structured content analysis index based on BRSR indicators for measuring ESG disclosure quality, and measures like cost of debt, estimated cost of equity and weighted average cost of capital for measurement of costs of financing, and return on assets, return on equity, Tobin’s Q for financial performance. Panel regression, fixed-effects estimation, robustness tests and diagnostics for endogeneity are expected to be used to analyse data. This research is expected to show whether the advantages of a superior corporate performance and financing in the form of a higher cost of capital are not merely the result of disclosure volume, but the quality of sustainability disclosure.