ESG Disclosure, Managerial Ability, and the Cost of Capital: Evidence From Information‐Asymmetric and Capital‐Constrained African Markets

ABSTRACT This study investigates how environmental, social, and governance (ESG) disclosure and managerial ability jointly influence firms' cost of capital within Africa's information‐asymmetric and capital‐constrained environment. Using a balanced panel of 4312 firm‐year observations from 308 listed firms across emerging African markets between 2011 and 2024, we employ high‐dimensional fixed effects and dynamic panel threshold models to control for country, industry, and temporal heterogeneity, as well as nonlinear regime shifts in information asymmetry and leverage. The results show that both ESG performance and managerial ability are independently associated with lower financing costs. More importantly, their interaction produces economically meaningful reductions in risk premiums, particularly under high information asymmetry and high leverage conditions. In these regimes, a moderate simultaneous improvement in ESG disclosure and managerial ability corresponds to approximately a 9–10 basis point decline in weighted average cost of capital and a 3–4 basis point reduction in cost of debt relative to sample means. These findings indicate that managerial competence enhances the credibility of ESG engagement, allowing sustainability initiatives to translate into tangible financing benefits in institutionally constrained markets. The study advances an integrated credibility–capability framework and provides context‐sensitive insights for regulators, boards, and investors seeking to align sustainable governance with capital efficiency in emerging economies.