Corporate Environmental Disclosure, Corporate Governance, and the Cost of Equity: Evidence from Pharmaceutical Listed Companies in China

As societal demand for sustainable development intensifies, corporate environmental performance has become a key consideration for investors in assessing risk and value. This study investigates the impact of corporate environmental disclosure on the cost of equity and the moderating role of corporate governance, using data from Chinese pharmaceutical listed companies between 2018 and 2022. Employing a firm- and time-fixed effects regression model, the results show that enhanced corporate environmental disclosure significantly reduces the cost of equity. Furthermore, corporate governance positively moderates this relationship, indicating that firms with more effective corporate governance experience a greater reduction in cost of equity from the enhanced disclosure. Robustness checks using a two-step system generalized method of moments and propensity score matching confirm these findings. This study provides empirical evidence on how corporate environmental disclosure improves capital market resource accessibility and underscores the critical role of corporate governance, offering practical implications for managers, investors, and policymakers.