ESG Disclosure Quality and Cost of Capital: Evidence from Oil and Gas Firms in Sub Saharan African
Abstract
This study examined the effect of Environmental, Social, and Governance disclosure quality on the cost of capital of listed oil and gas firms in Sub-Saharan Africa. The motivation for the study arises from increasing global pressure on extractive industries to improve sustainability reporting and the persistent perception of high financial risk in the oil and gas sector. Using a panel dataset drawn from selected listed oil and gas firms across Nigeria, South Africa, Angola, and Ghana over the period 2010–2024, the study applies a fixed-effects regression model to assess the relationship between ESG disclosure quality and cost of capital. ESG disclosure quality is measured using a structured content analysis index based on Global Reporting Initiative standards, while cost of capital is proxied by weighted average cost of capital . The results reveal that ESG disclosure quality has a statistically significant negative effect on cost of capital (β = -0.284, p < 0.01), indicating that firms with higher ESG transparency enjoy lower financing costs. Further results show that environmental disclosure exerts the strongest influence (β = -0.312), followed by governance disclosure (β = -0.261) and social disclosure (β = -0.198). The model explains approximately 63% of the variation in cost of capital (Adjusted R2 = 0.631). The study concludes that improved ESG disclosure reduces perceived risk and enhances investor confidence in Sub-Saharan Africa’s oil and gas sector.
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