Do Esg Practices Reduce Firms’ Cost of Debt? Evidence from the Mena Region

Abstract Book of the 11th International Conference on Research in Business, Management and Economics

Year: 2026

[PDF]

Do Esg Practices Reduce Firms’ Cost of Debt? Evidence from the Mena Region

Samar Ali

ABSTRACT:

This study investigates how Environmental, Social, and Governance (ESG) practices influence firms’ cost of debt in MENA countries. Using panel data from publicly listed firms in eight MENA countries between 2019 and 2024, the study relies on data collected from Thomson Reuters DataStream. Fixed-effects regression models are employed to examine the relationship between ESG performance and debt financing costs, an area that has received less attention compared to the extensive focus on the cost of equity in previous research. The findings indicate that firms with stronger ESG performance tend to face lower borrowing costs, suggesting that lenders perceive responsible and sustainable business practices as a signal of lower risk. These results are consistent with prior studies such as Goss and Roberts (2011) and Eliwa, Aboud, and Saleh (2019), which documented that stronger ESG performance is associated with improved lender perceptions and lower debt financing costs. By providing evidence from the MENA region, this study contributes to the growing ESG literature in emerging markets and offers valuable insights for policymakers, investors, and corporate managers seeking to promote sustainable and financially resilient businesses.

Keywords: ESG Performance, Cost of Debt, MENA Countries, Panel Data, Capital Structure