Page 56 - SUSTAINABILITY ISSUES & COVID-19

1.2 Variable Measurements
1.2.1 Dependent Variables
The dependent variables of this research are financial advantage represented by Cost of Debt with the source of funding
from debt securities (bond) and bank loan. To test Research Model H1, the Cost of Debt information is acquired from
Bloomberg based on the year-end financial position of the company. It is the after-tax weighted average cost of debt
(COD) based on Bloomberg’s proprietary calculation. To test Research Model H2, the Corporate’s bond spread (YTM)
as a proxy for the cost of debt of financing through bonds is acquired from Bloomberg based on the Yield to Maturity
(Mid Yield), calculated on an average yearly basis. To test Research Model H3, the Bank Loan effective interest rate (EIR)
as a proxy for the cost of debt of financing through bank loans is acquired from Bloomberg. The EIR proxy is calculated
using the total pre-tax weighted average cost of debt. If there is the existence of bond financing, to exclude the bond’s
portion, the total pre-tax weighted average cost of debt is deducted by the bond’s YTM (on an average yearly basis).
The effective interest rate related to bond financing uses its Yield to Maturity, as a proxy.

1.2.2 Independent Variables
The independent variable used, i.e. the non-financial disclosure is measured by using Bloomberg’s score based on
the extent of a firm’s ESG disclosures. The Bloomberg (annual) score varies from 0.1 for firms that disclose a minimum
amount of ESG data, to 100 for those that disclose every data point collected. Bloomberg’s ESG score is generated
based on both voluntary and mandatory disclosures mainly sourced from the financial statements and other forum
publications. Each data point is weighted in terms of importance, with data such as Greenhouse Gas Emissions carrying
greater weight than other disclosures. The score is also tailored to different industry sectors. In this way, each company
is only evaluated in terms of the data that is relevant to its industry sector.

1.2.3 Control Variables
The Control variables used for Research Model H1, H2 and H3 are SIZE, LEV, ROE, CFO and GDP. Firm size (SIZE) is
measured using the natural log of the Total Assets, concerning Erragragui (2018) and Chauhan & Kumar (2018). Eliwa
et al. (2019), Chauhan & Kumar (2018) and many ESG literature that search for the relationship between ESG and COD
calculated leverage (LEV) ratio as the Debt ratio (total debt/total assets) to estimate the portion of the assets are
financed by debt. In this research, the Financial Leverage data is sourced from Bloomberg database that uses the Equity
Multiplier or Total Asset/Equity ratio (= total assets/total shareholder’s equity). The ratio is converted to Debt ratio used
by using: Debt ratio = 1-(1/Equity Multiplier). This research expects to find a positive relationship between the leverage
of the firm and the cost of debt.

According to Haniffa & Cooke (2005) that higher profitability increases the firm’s ability to more extensive sustainability
reporting, and additionally supported by Erragragui (2018) that the profitability is perceived as a positive determinant
of firms’ repayment capacity, whereby the return on equity (ROE) is used as a proxy to the company’s profitability.
Moreover, Cheng, Ioannou & Serafeim (2014) documented that firms with higher ESG performance experience lower
capital constraints, whereby CFO is used as a proxy. Hence, this increases their ability to repay the loan. CFO = cash
flows from operating activities/total assets. GDP is GDP growth for each country. In general, The research expects to
find negative associations between the SIZE, ROE, CFO, and GDP with the cost of debt. Besides, this study also uses a
dummy control variable in the form of year to control the effects of years of observation and country to control the
effects of each country.

Further, the Hypothesis (regression) test is carried by using the goodness of fit or coefficient determination (adjusted
R ) test, t-test for equality of means and Levene’s test (f-test) for the significance of the individual parameter using for
2
variance equality. The closer the value of Adjusted R to 1, the stronger the independent variables drive the dependent
2
variable. In the t-test, if the p-value less than 5%, then the independent variables partially have a significant effect on
the dependent variable. The F-test is used to test whether the overall independent variable has a significant influence
on the dependent variable at 0.05. The results are discussed in the following section.

ASEAN countries have varying regulation and practices of sustainability reporting and its degree of comprehensive
disclosure. To provide further insight and to understand the differentiating factors between the countries, an additional
country-by-country test is performed. Due to the limitation of the key dependent data from each country, the key

International Conference on Sustainability 55
(5 Sustainability Practitioner Conference)
Th