Creditor Screening of Voluntary ESG Disclosure: Pillar Specificity and Operational Profitability as a Credibility Cue for Debt Pricing

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ABSTRACT Grounded in signaling and disclosure theory, we examine when and which voluntary ESG disclosure pillars are associated with firms' cost of debt in an emerging market setting characterized by voluntary reporting, concentrated ownership, and debt centered corporate finance. Using firm‐ and year‐fixed‐effects models and several robustness checks on a panel of Chilean listed firms from 2015 to 2022, we find that environmental and governance disclosures are more consistently associated with lower debt costs, whereas social disclosure shows weaker and less stable associations. Higher operational profitability strengthens the negative association between pillar disclosure and the cost of debt, consistent with a credibility‐based mechanism in which creditors appear to place greater weight on voluntary disclosure when it is anchored in observable operational capacity. By contrast, additional information‐channel tests show no robust direct or moderating role for institutional ownership or stock‐market liquidity. Robustness tests using alternative measures and sample restrictions preserve the operational profitability interaction patterns; dynamic specifications suggest that pillar main effects are estimated less precisely, supporting a cautious interpretation centered on credibility‐contingent associations rather than unconditional disclosure effects. Finally, reverse‐causality diagnostics provide no systematic evidence that lower borrowing costs precede higher subsequent ESG disclosure. Overall, the evidence is consistent with pillar specific differences in materiality and verifiability under voluntary disclosure regimes in debt financing centered markets with concentrated ownership. Our study contributes to the literature by clarifying that voluntary ESG disclosure is more likely to be credit‐relevant when creditors can interpret the pillar‐specific signal and when operational profitability enhances its credibility.

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