Effect of Environmental and Governance Disclosure on Value of Listed Financial Services Companies in Nigeria

Abstract

This study investigates the effect of environmental disclosure and governance disclosure on firm value within the unique institutional context of Nigeria's listed financial services sector. Grounded in Stakeholder Theory, the research examines how these two key sustainability reporting dimensions influence firm value measured by Tobin's Q. Utilizing an ex-post facto research design, secondary data were collected from the annual reports of 44 listed financial services companies over a ten-year period (2015–2024), resulting in 440 firm-year observations. A census sampling method was employed due to the manageable population size, and the data were analyzed using a Random Effects panel regression model, following diagnostic tests that confirmed homoscedasticity and the appropriateness of the random effect’s estimator. The findings reveal a complex and divergent disclosure-value relationship in the Nigerian context. Environmental disclosure exhibits a significant positive relationship with firm value, Conversely, governance disclosure demonstrates a significant negative relationship with firm value, the study concludes that sustainability disclosure effects on firm value are dimension-specific and context-dependent. In Nigeria's emerging market environment, environmental transparency proves effective in enhancing market valuation, while governance disclosure requires substantive quality rather than mere extensiveness to positively influence investor perceptions. It recommends that financial services companies prioritize meaningful environmental disclosures while ensuring that governance disclosures demonstrate governance excellence rather than regulatory compliance and calls for further qualitative inquiry into the mechanisms underlying the counterintuitive governance disclosure finding.