The moderating role of audit quality in ESG disclosure and cost of debt nexus: Asian evidence

Thi Hanh Dung Truong, Thanh Thuy Ngoc Tran and Tran Trong Tai Vu

Managerial Auditing Journal, 2026, vol. 41, issue 4, 718-738

Abstract: PurposeThis paper aims to investigate the moderating role of audit quality in the relationship between disclosure of environmental, social and governance performance (ESG disclosure) on cost of debt and test the aforementioned nexuses in developed and emerging markets.Design/methodology/approachThe authors apply two-step system generalized method of moments estimator to analyze a sample of 6,011 observations from 1,443 Asian listed companies during 2015–2023. Further assessments are made on developed and emerging Asian subsamples, also across different firm characteristics. Data has been collected from Refinitiv Eikon.FindingsAudit quality improves creditors’ responses toward ESG disclosure of firms in various institutional settings and firm attributes.Practical implicationsThis study highlights the use of high audit-quality service as a reliable tool to promote the sustainability of listed companies in both developed and emerging markets.Originality/valueThis research underscores: the significant moderating role of audit quality in the link between ESG disclosure and cost of debt; the employment of auditor fees as an alternative proxy for high-quality audit; the infusing institutional difference hypothesis logic with legitimacy theory in explaining ESG disclosure attempts of countries in dissimilar markets; and the infusion of legitimacy theory with agency theory to emphasize the essential role of audit quality in legitimized efforts and reducing information asymmetries.

Keywords: Audit quality; Sustainability management; Institutional difference hypothesis; Legitimacy theory; Agency theory; Auditor fee (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-07-2024-4395

DOI: 10.1108/MAJ-07-2024-4395

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