Assessing the influence of ESG performance on the cost of debt: evidence from the hotel industry

Siew, Sydney Jia Ying (2025) Assessing the influence of ESG performance on the cost of debt: evidence from the hotel industry. Final Year Project, UTAR.

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Abstract

This study explores the effect of Environmental, Social, and Governance (ESG) performance on the cost of debt within the global hotel industry. While most of the previous studies have largely concentrated on the link between ESG and equity performance, limited attention has been given to its influence on borrowing costs, particularly at the disaggregated sub-dimension level. To bridge this gap, the study analyzes the hotel industry over the period 2017–2024. Panel data econometric techniques were employed to this study, with ESG ratings, both the overall scores and ten sub-dimensions. The financial indicators were obtained from Refinitiv Eikon/LSEG. The cost of debt was assessed using accounting-based measures. Pooled OLS models were applied in this study, supplemented by robustness checks in EViews. The results reveal that ESG performance has a significant impact on firms’ borrowing costs, although the direction of the effect varies across environmental, social, and governance sub-dimensions. The stronger ESG engagement is generally linked to lower debt costs. This study contributes to the broader ESG–finance literature by providing industry-specific evidence for the hotel sector and offering detailed insights into ESG sub-dimensions.

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