The Effect of ESG Scores, Tax Strategy, and Company Size on Debt Costs
(A Study of Manufacturing Companies Listed on the Indonesia Stock Exchange for the 2019-2023 Period)
Keywords:
ESG, tax strategy, company size, cost of debt, Interest Coverage Ratio, Indonesian manufacturing
Abstract
The cost of debt is a crucial component of the capital structure because it reflects the credit risk perceived by creditors. In the context of external financing, environmental factors, tax strategies, and company characteristics can influence the level of debt costs. This study aims to analyze the effect of ESG scores, tax strategies, and company size on the cost of debt in manufacturing companies listed on the Indonesia Stock Exchange for the 2019–2023 period. The research method uses panel data regression with purposive sampling of manufacturing companies. The ESG score is proxied by the number of environmental certifications, tax strategies by the Cash Effective Tax Rate (CETR), company size by the natural log of total assets, and the cost of debt by the Interest Coverage Ratio (ICR). The results show that the ESG score negatively affects the cost of debt, tax strategies also negatively affect the cost of debt, while company size has a positive effect on the cost of debt. These findings suggest that corporate sustainability and tax compliance can reduce credit risk perceived by creditors, while large company size does not always guarantee lower funding costs. A contextual approach through the use of environmental certification and CETR provides a more practical understanding of the determinants of debt costs, and emphasizes that sustainability and fiscal governance are relevant financial strategies for the manufacturing sector in Indonesia.References
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Published
2025-12-23
How to Cite
Mightyn, A., & Fadjarenie, A. (2025). The Effect of ESG Scores, Tax Strategy, and Company Size on Debt Costs. Kontigensi : Jurnal Ilmiah Manajemen, 13(2), 1099-1123. https://doi.org/10.56457/jimk.v13i2.856
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