Do anti-corruption strategy disclosure mediate the relationship between ESG practices and cost of debt?

Purpose This study aims to investigate the direct and indirect relationship between environmental, social and governance (ESG) practices and the cost of debt in Chinese companies, using anti-corruption strategy disclosure as a mediating variable. Design/methodology/approach To test the direct and indirect effects between ESG practices and the cost of debt using structural equation modeling (SEM), this study used a panel data set of 728 Chinese companies between 2018 and 2023. Data were collected from Thomson Reuters DataStream, the ASSET4 database and company annual reports and then analyzed using SEM to test the hypotheses. Findings Regression results show that anti-corruption mediates the relationship between ESG practices and the cost of debt in Chinese companies. This suggests that combating corruption helps lower the cost of debt by strengthening financial transparency and corporate credibility with creditors. In addition, anti-corruption partially mediates this relationship, exhibiting a significant negative effect. Practical implications This study shows that ESG practices and the fight against corruption reduce information asymmetry and the risk perceived by creditors, thereby strengthening the transparency, ethics, governance and sustainability of companies, and offering concrete guidance for strategic decision-making. Originality/value This study provides new insights by showing how ESG practices and anti-corruption measures can reduce the cost of debt, examining their direct link and the mediating effect of anti-corruption actions, an aspect that has received little attention.