The relevance of non‐financial disclosure in influencing the cost of capital: Empirical evidence from the agri‐food sector

The growing sensitivity of stakeholders towards health, food safety and environmental protection has pushed agri-food companies to embrace a new way of doing business, making huge investments to reduce their impact on ecosystem. However, these efforts would be in vain if not properly communicated, especially to financial institutions and investors, as they are the fundamental and supportive stakeholders. Through non-financial disclosure, indeed, this greater transparency would translate into benefits, such as creditworthiness, lower risks and costs of capital. From these considerations, this study aims at verifying to what extent the implementation of sustainability strategies can affect the overall cost of capital, observed in its dual form: debt and equity. In particular, through panel data analyses, it tested how non-financial disclosure—measured by Bloomberg's disclosure scores—could influence the cost of capital of a sample of 73 international agricultural firms observed from 2015 to 2019. The results showed a significant and negative relationship, suggesting that a higher level of disclosure could be effective in lowering firms' financial burden. This study contributes to the literature on non-financial disclosure and cost of capital as it studies this phenomenon in a sector in which previous research is limited.