Sustainable business development (ESG) and cost of capital before and after Covid-19

Abstract

In the pursuit of sustainable growth, businesses are displaying greater care for the environment and society in their operations and relationships with stakeholders. The question for Vietnam is whether or not businesses have a complete understanding of sustainable development and believe the implementation of sustainable development activities would benefit both businesses and society. Several Vietnamese scholars have provided empirical evidence that integrating CSR (a component of sustainable development) improves financial performance in order to answer this question. Our research topic is to determine the current state of debt and cost of equity among Vietnamese businesses, as well as whether or not there are variances in cost of capital among industries, exchanges, and time periods. Whether or not corporate sustainability will have an effect on the weighted average cost of capital, the cost of equity, and the cost of capital for Vietnamese-listed companies, and whether or not this effect is reversible. The following regression models are employed: the least squares regression model OLS, the stochastic action regression model (REM), and the fixed-action regression model (FEM). In the Research Paper, the author presents three research models with cost of equity, cost of debt, and weighted average cost of capital as dependent variables based on research hypotheses. Size, financial performance, Tobin Q, industry, leverage, covid shock, and cash ratio are the model's control variables when the company's sustainable development variable serves as the explanatory variable. According to the findings of a study that quantified the effect of business sustainable development on the cost of capital in 213 listed companies over a seven-year period, the more developed the enterprise, the lower its cost of capital, both in terms of its cost of equity and its weighted average cost of capital. This indicates that investors are more confident in enterprises that invest in rural development, moreover the commercial marketplace Sustainable development companies were awarded a lower risk rating by investors, resulting in a fall in stock price.