This study investigates whether audit quality moderates the relationship
between environmental, social, and governance (ESG) performance and a firm’s
weighted average cost of capital (WACC). Using a quantitative panel research design
with the method of Pooled Ordinary Least Square (POLS) regression on 77
nonfinancial listed firms that disclose ESG information on the Indonesia Stock
Exchange (IDX) during 2023-2024. We test whether higher ESG scores reduce WACC
and whether this negative ESG-WACC association is stronger for firms audited by
high-quality auditors from the big four (PWC, Deloitte, KPMG, and EY).
The results indicate that ESG performance significantly reduces the cost of
capital, aligning with signaling and agency theories by demonstrating that
sustainability initiatives serve as a risk reduction mechanism. However, audit quality
proxied by big four audit companies does not statistically moderate the ESG-WACC
relationship. These findings suggest that while Indonesian investors reward ESG
transparency with lower financing costs, the external auditor’s reputation does not yet
provide an additional significant signal in this context.