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Environmental, Social, and Governance Disclosure, Ownership Structure and Cost of Capital: Evidence from the UAE

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  • Nejla Ould Daoud Ellili

    (College of Business, Abu Dhabi University, P.O. Box 59911, Abu Dhabi, UAE)

Abstract

The capital structure decision is one of the most vital financial decisions of the corporation that consists of determining the optimal combination of equity and debt for the companies that would reduce the cost of capital. The examination of the capital structure has always gained importance especially in the theoretical and empirical studies while there is no study of the relationship between the environmental, social, and governance (ESG), the ownership structure, and the cost of capital. In this context, this paper aims to examine the potential impacts of the ESG disclosure and ownership structure on the cost of capital by using a sample of 30 companies listed on the UAE financial markets (Abu Dhabi Stock Exchange and Dubai Financial Market) during the period 2010–2019. The data show that there is an increasing trend in the different non-financial corporate disclosures. The empirical results of various models show that the ESG disclosure, the insider and the institutional ownerships have negative and significant impacts on the cost of capital. Furthermore, the environmental and the governance disclosures reduce the cost of capital. This paper demonstrates the strong role played by the ESG disclosure and the ownership structure in reducing the cost of capital for the companies. These results would encourage the companies in implementing the best practices of the non-financial disclosures and regulating their corporate governance mechanisms.

Suggested Citation

  • Nejla Ould Daoud Ellili, 2020. "Environmental, Social, and Governance Disclosure, Ownership Structure and Cost of Capital: Evidence from the UAE," Sustainability, MDPI, vol. 12(18), pages 1-23, September.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:18:p:7706-:d:415360
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    Cited by:

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    2. Salvi, Antonio & Nirino, Niccolò & Battisti, Enrico & Gianfrancesco, Igor, 2024. "Payout policy and ESG: A European investigation," Research in International Business and Finance, Elsevier, vol. 68(C).
    3. Anjun Hu & Xianzhu Yuan & Shuangshuang Fan & Shali Wang, 2023. "The Impact and Mechanism of Corporate ESG Construction on the Efficiency of Regional Green Economy: An Empirical Analysis Based on Signal Transmission Theory and Stakeholder Theory," Sustainability, MDPI, vol. 15(17), pages 1-24, September.
    4. Doshi, Medha & Jain, Riidhi & Sharma, Dipasha & Mukherjee, Deepraj & Kumar, Satish, 2024. "Does ownership influence ESG disclosure scores?," Research in International Business and Finance, Elsevier, vol. 67(PA).
    5. Pedro Verga Matos & Victor Barros & Joaquim Miranda Sarmento, 2020. "Does ESG Affect the Stability of Dividend Policies in Europe?," Sustainability, MDPI, vol. 12(21), pages 1-15, October.
    6. Hadiqa Ahmad & Muhammad Yaqub & Seung Hwan Lee, 2024. "Environmental-, social-, and governance-related factors for business investment and sustainability: a scientometric review of global trends," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(2), pages 2965-2987, February.
    7. Jyoti Dua & Anil Kumar Sharma, 2024. "Corporate Sustainability and Capital Costs: A Panel Evidence from BRICS Countries," Indian Journal of Corporate Governance, , vol. 17(1), pages 77-101, June.
    8. Ahmed Saber Moussa & Mahmoud Elmarzouky, 2024. "Beyond Compliance: How ESG Reporting Influences the Cost of Capital in UK Firms," JRFM, MDPI, vol. 17(8), pages 1-21, July.
    9. Desmond Bayong & Bernard Bawuah & Elizabeth Amoah, 2025. "Advancing environmental, social, and governance disclosure in emerging economies: does regulatory environment and ownership structure matter?," SN Business & Economics, Springer, vol. 5(1), pages 1-45, January.

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