Research Article
Sustainability and Capital Costs: The Impact of ESG Performance, Efficiency, and Firm Characteristics on WACC
@INPROCEEDINGS{10.4108/eai.30-7-2025.2360573, author={Muhammad Fuad and Della Kristi Noviyandra and Subagyo Subagyo and Yuli Soesetio and Cipriano B. da Silava}, title={Sustainability and Capital Costs: The Impact of ESG Performance, Efficiency, and Firm Characteristics on WACC}, proceedings={Proceedings of the 5th Business Innovation Sustainability and Technology International Conference, BISTIC 2025, 30th July 2025, Malang, Indonesia}, publisher={EAI}, proceedings_a={BISTIC}, year={2025}, month={12}, keywords={sustainability; esg; dea; cost of capital; wacc}, doi={10.4108/eai.30-7-2025.2360573} }- Muhammad Fuad
Della Kristi Noviyandra
Subagyo Subagyo
Yuli Soesetio
Cipriano B. da Silava
Year: 2025
Sustainability and Capital Costs: The Impact of ESG Performance, Efficiency, and Firm Characteristics on WACC
BISTIC
EAI
DOI: 10.4108/eai.30-7-2025.2360573
Abstract
ESG practices being widely promoted with the objectives of increasing sustainability-related transparency, demonstrating stronger performance, and reduce perceived risk. This study examines the relationship between ESG score and DEA into cost of capital as a critical indicator in assessing company performance, specifically financing effectiveness. Total of 32 companies listed on IDX that reports ESG data from 2016 to 2023 became the sample in this research. Data of ESG collected from LSEG database while DEA is derived through analysis with STATA 16. Fixed Effects and Random Effects panel data estimation models are applied in analyzing this research. Based on this research, ESG shows a positive impact while DEA shows a negative impact towards the cost of capital proxied by WACC, implies ESG effects could significantly decrease cost of capital while it effectively enhances company performance, as shown by DEA score. These findings provide insight into matters that company need to prioritize in their operation in attempt to reduce their cost of capital.
