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1. Introduction
Sustainable finance examines how finance (investment and lending) is related to economic, social and environmental issues. The economy and society were tested for resilience during the crisis. Likewise, sustainability was tested during a crisis and the COVID-19 pandemic. The pandemic is unique in several respects, as it is exogenous, uncertain and global (Borio, 2020). The author was encouraged to analyze the scant research on the Indonesian setting; capital structure; environmental, social and governance (ESG); COVID-19 and its implications. The goal is to identify substantial differences in the cost of capital and the impact of the pandemic on enterprise performance, particularly in two groups: ESG enterprises and non-ESG firms.
Previous studies conducted between 2020 and 2021 addressed the impact of the COVID-19 crisis on global health, economic and social conditions; however, little is known about the impact of the pandemic on financial performance differences between ESG and non-ESG firms in emerging countries such as Indonesia. According to earlier data, high-ESG enterprises have a lower cost of capital (Gholami et al., 2022), and ESG information and disclosures negatively impact the cost of capital (Ng and Rezaee, 2015; Raimo et al., 2021). Other studies on the corporate social responsibility dimension investigated the relationship between firm value and CSR during the pandemic (Qiu et al., 2021). Hence, this study aims to fill the deficiencies in the scant literature on Indonesian enterprises regarding the impact of the pandemic on the relationship between the cost of capital and a firm’s financial performance.
Specifically, this study investigates the relationship between company performance and the weighted average cost of capital. In addition, it examines whether there are any significant variations in how superior and inferior ESG performers are affected by the crisis and the cost of capital. The conclusions serve as the basis for discussions and assessments of how the cost of capital may impact the performance and sustainability of a firm in the context of the Indonesian market. While there is existing research on this subject, it mainly focuses on developed markets, with only a brief mention of Indonesian firms. Notably, although this study’s objectives and results are in line with those of earlier empirical studies, their importance and points of view are novel.
The investigation of...