In recent years, there has been increasing focus in both academic and practical circles on enhancing corporate sustainable development through ESG (Environmental, Social, and Governance) performance. Based on theories including information asymmetry, stakeholder theory, principal-agent theory, and organizational expectations, this study employs annual data from A-share listed companies from 2010 to 2023 to examine the impact of ESG performance expectation gaps on the cost of equity financing. The results indicate that a larger ESG performance expectation gap is positively associated with a higher cost of equity financing. This effect is particularly evident among high-tech firms, non-heavily polluting companies, and profitable enterprises. In terms of underlying mechanisms, corporate reputation and product market competitiveness are identified as important channels through which the gap influences financing costs. By investigating financing costs from the perspective of ESG performance expectation gaps, this study contributes to motivating listed companies to place greater emphasis on their ESG performance.

Boqing Zhao, Xuejun Xu. The Effect of ESG Performance Expectation Gap on the Cost of Equity Financing. Academic Journal of Business & Management (2026), Vol. 8, Issue 2: 37-44. https://doi.org/10.25236/AJBM.2026.080205.

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