ESG Disclosure Quality and Cost of Capital in Nigeria.

This study examines the impact of Environmental, Social, and Governance (ESG) disclosure quality on the cost of capital among Nigerian publicly listed firms. Using a panel dataset of 152 firms over the period 2015–2024, the study investigates how ESG disclosure, alongside firm size, leverage, and profitability, influences financing costs. ESG disclosure quality was measured through a content analysis of annual and sustainability reports, while cost of capital was computed using the weighted average cost of capital (WACC). Descriptive statistics revealed moderate ESG disclosure practices, considerable variation in firm leverage, and heterogeneous profitability across firms. Correlation analysis showed a significant negative association between ESG disclosure quality and cost of capital, indicating that firms with higher ESG transparency attract cheaper financing. Panel regression analyses, guided by pooled OLS, fixed effects, and random effects models, confirmed that ESG disclosure quality significantly reduces cost of capital, while leverage increases it, and firm size and profitability exert negative effects. Post-estimation diagnostics, including Hausman, Breusch–Pagan, Wooldridge, and modified Wald tests, validated model robustness and appropriateness. The findings underscore the strategic importance of ESG disclosure in lowering financing costs and enhancing investor confidence. The study recommends that Nigerian firms strengthen ESG reporting, optimize capital structures, and integrate ESG into corporate strategy to achieve financial efficiency and sustainable value creation.