The Impact of Climate Change Disclosure on Cost of Debt: The Moderating Effect of Political Connections and ESG Disclosure

Abstract

This study was conducted to investigate the impact of climate change disclosure on the cost of debt and gain deep insight into the usefulness of political connections and ESG disclosure for reducing the cost of debt. A sample of 83 listed firms in the Egyptian context, spanning 498 observations over 6 years from 2018 to 2023, was used. A quantitative approach was adopted to examine the key hypotheses. This research reveals that climate change disclosure decreases the cost of debt. Furthermore, political connections and ESG disclosure moderate the main nexus. Multiple robustness checks were conducted to confirm these findings. Crucial policy implications for regulators, investors, and sustainability experts were developed by highlighting the latest practices of corporations aligned with achieving Sustainable Development Goals. The significance of this study lies in filling several gaps in the literature regarding climate change disclosure, political connections, and ESG disclosure and how a company’s strategic approach can impact the cost of capital.