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Influence of Sustainability (ESG) Reporting on the Firm Value of Listed Companies in Nigeria

Abstract

Sustainability reporting has become an increasingly important component of corporate reporting as organizations seek to demonstrate their commitment to environmental stewardship, social responsibility, and sound governance practices. Environmental, Social, and Governance (ESG) reporting provides stakeholders with comprehensive information regarding a company's non-financial performance, risk management practices, ethical standards, and long-term sustainability strategies. Unlike traditional financial reporting, ESG reporting offers insights into how organizations create sustainable value while addressing environmental challenges, social expectations, and governance responsibilities. Globally, investors, regulators, creditors, customers, and other stakeholders increasingly rely on ESG disclosures to evaluate corporate resilience, risk exposure, transparency, and long-term value creation. In response to growing international sustainability standards, including the International Sustainability Standards Board (ISSB) framework, the Global Reporting Initiative (GRI), and other ESG reporting guidelines, listed companies are integrating sustainability information into their corporate reporting processes. In Nigeria, increasing regulatory attention from the Financial Reporting Council of Nigeria (FRCN), the Nigerian Exchange Group (NGX), the Securities and Exchange Commission (SEC), and other regulatory bodies has encouraged listed companies to strengthen sustainability disclosures and corporate governance practices. Furthermore, heightened awareness of climate change, environmental protection, corporate social responsibility, and ethical business conduct has intensified stakeholder demand for transparent ESG reporting. Despite these developments, the extent to which sustainability reporting influences firm value among listed companies in Nigeria remains uncertain. While comprehensive ESG disclosures may improve investor confidence, reduce information asymmetry, strengthen corporate reputation, and enhance market valuation, inadequate sustainability reporting may weaken stakeholder trust and reduce investment attractiveness. Existing empirical findings remain mixed due to differences in ESG measurement approaches, industrial coverage, and research methodologies. Against this background, this study investigates the influence of Sustainability (ESG) reporting on the firm value of listed companies in Nigeria. The study is anchored on Stakeholder Theory, Legitimacy Theory, and Signaling Theory. Stakeholder Theory posits that organizations create sustainable value by addressing the interests and expectations of diverse stakeholder groups, including investors, employees, customers, regulators, communities, and the environment. Legitimacy Theory explains that companies disclose sustainability information to demonstrate compliance with societal expectations, maintain organizational legitimacy, and secure continued access to critical resources. Signaling Theory argues that high-quality ESG reporting serves as a positive signal of corporate transparency, effective governance, sound risk management, and long-term financial sustainability, thereby enhancing investors' perceptions and firm value. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between sustainability reporting and firm value among listed companies in Nigeria. The study adopts an ex post facto research design utilizing secondary data obtained from the audited annual reports, sustainability reports, integrated reports, and financial statements of companies listed on the Nigerian Exchange Group (NGX), together with relevant regulatory publications from the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), and other relevant institutions. A longitudinal panel data approach covering a ten-year period will be employed to examine the relationship between sustainability reporting and firm value over time. Purposive sampling will be used to select listed companies with complete and consistent financial and sustainability reporting information throughout the study period. Sustainability reporting will be measured using Environmental, Social, and Governance (ESG) disclosure indices, sustainability reporting scores, environmental disclosure index, social disclosure index, governance disclosure index, and overall ESG reporting quality, while firm value will be measured using Tobin's Q, Market-to-Book Ratio (MBR), Market Capitalization, Earnings per Share (EPS), Price-to-Earnings (P/E) Ratio, and Economic Value Added (EVA). Data analysis will involve descriptive statistics to summarize the characteristics of the study variables, correlation analysis to determine the degree of association among variables, and panel regression techniques, including Fixed Effects and Random Effects models, to estimate the influence of sustainability reporting on firm value. The Hausman specification test will determine the most appropriate estimation model, while diagnostic tests including multicollinearity, heteroskedasticity, autocorrelation, stationarity, normality, cross-sectional dependence, endogeneity, and model specification tests will be conducted to ensure the validity, consistency, reliability, and robustness of the empirical findings. The study anticipates that sustainability (ESG) reporting will have a significant positive influence on the firm value of listed companies in Nigeria. Comprehensive ESG disclosures are expected to improve corporate transparency, strengthen stakeholder confidence, reduce information asymmetry, enhance corporate reputation, and increase investors' willingness to invest in firms demonstrating strong environmental, social, and governance performance. Effective sustainability reporting is also anticipated to improve access to capital, lower the cost of financing, strengthen risk management practices, support regulatory compliance, and enhance long-term corporate competitiveness. Furthermore, companies with robust ESG reporting practices are expected to attract socially responsible investors, improve market valuation, strengthen customer loyalty, and enhance shareholder wealth by demonstrating commitment to sustainable business practices. Conversely, inadequate sustainability disclosures may increase information uncertainty, weaken stakeholder confidence, reduce market credibility, expose firms to reputational risks, and negatively affect market valuation. Consequently, organizations that integrate sustainability reporting into their strategic and financial reporting processes are expected to achieve superior firm value, stronger market performance, and greater long-term sustainability. This study is expected to make significant theoretical and empirical contributions to the literature on accounting, corporate finance, sustainability reporting, and corporate governance by providing robust evidence on the relationship between Sustainability (ESG) reporting and firm value among listed companies in Nigeria. Unlike previous studies that focused primarily on corporate social responsibility or isolated environmental disclosures, this research provides a comprehensive assessment of ESG reporting using multiple sustainability dimensions and firm-level longitudinal panel data. The findings will provide valuable insights for listed companies, the Nigerian Exchange Group (NGX), the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), investors, financial analysts, corporate managers, policymakers, sustainability professionals, professional accounting bodies, and academic researchers regarding the strategic importance of ESG reporting in promoting corporate transparency, investor confidence, and long-term value creation. The study will also provide evidence-based recommendations for strengthening sustainability reporting frameworks, improving ESG disclosure quality, enhancing regulatory compliance, promoting responsible corporate governance, encouraging sustainable investment practices, and fostering sustainable economic development and capital market growth in Nigeria.

Keywords: Sustainability reporting, Environmental Social and Governance (ESG), firm value, listed companies, corporate governance, sustainability disclosure, Tobin's Q, panel regression, Nigerian Exchange Group (NGX), Nigeria.