The Effect of Environmental, Social and Governance (ESG) on Capital Cost - Evidence from Korean Kosdaq Firms -

This paper investigates the effect of environmental, social and governance (ESG) on the cost of capital(WACC) for a sample of Kosdaq firms. It examines if financial markets value continuous investment in ESG movement through higher market capitalization and lower cost of capital. This study hypothesized that ESG movement would affect the cost of capital. This study examined the effect of ESG movement on the cost of capital using a large sample of Korean firms. The measure of ESG movement was used as an ESG(Environment, Social, Governance) index published by Korean Corporate Governance Service (KCGS). The results of this study find that the firms with ESG movement exhibit the negative on the cost of capital. These results are robust across different measures of variables and testing methodologies.