The Relationship between Environmental, Social, and Governance (ESG) and Cost of Debt of Listed Companies in Thailand

Abstract

This study examines the relationship between Environmental, Social, and Governance (ESG) performance and the cost of debt (COD) of listed companies in Thailand. Using panel data from 66 listed firms during 2016-2024 (594 firm-year observations), ESG data were obtained from Bloomberg and analyzed using a Fixed Effects model. The analysis incorporates overall ESG scores, individual environmental, social, and governance pillar scores, and relevant financial control variables.

The findings indicate that the overall ESG score and the environmental score exhibit negative coefficients in relation to the cost of debt, which is consistent with theoretical expectations. However, these relationships are not statistically significant, suggesting that ESG performance has not yet been clearly incorporated into the determination of borrowing costs in the Thai context. This result may be explained by the characteristics of Thailand’s financial system, which remains largely dependent on financial institutions. Meanwhile, the social and governance scores do not show statistically significant relationships with the cost of debt. In contrast, statistically significant relationships are observed among the control variables. Return on assets and firm size are negatively associated with the cost of debt, while the current ratio is positively associated with the cost of debt. Overall, the findings suggest that creditors in Thailand continue to place greater emphasis on traditional financial information than on ESG-related information when assessing credit risk and determining firms’ borrowing costs.