Corporate Environmental Responsibility and the Cost of Capital: International Evidence

Sadok El Ghoul, Omrane Guedhami, Hakkon Kim, Kwangwoo Park

2023 | Academic | Cost of Capital, CSR

In this paper we examine how corporate environmental responsibility (CER) affects the cost of equity capital for manufacturing firms in 30 countries. Using several approaches to estimate firms’ ex ante equity financing costs, we find in regressions that control for firm-level characteristics as well as industry, year, and country effects that the cost of equity capital is lower when firms have higher CER.