ESG Disclosure Quality and Firm Value of Oil and Gas Companies in Nigeria

Abstract

This study examines the effect of ESG disclosure quality on the firm value of selected Nigerian oil and gas companies over the period 2020 to 2024. The research specifically investigates the impact of Environmental Disclosure Score (EDS), Social Disclosure Score (SDS), and Governance Disclosure Score (GDS) on firm value, proxied by Tobin’s Q, while controlling for financial leverage (LEV). The study employed an ex-post facto research design, using secondary data collected from annual and sustainability reports of five listed oil and gas companies: Seplat Energy Plc, Oando Plc, Conoil Plc, Total Energies Nigeria Plc, and Eterna Plc. Data were analyzed using panel regression techniques to determine the effect of ESG disclosure components on firm value. The findings reveal that environmental, social, and governance disclosures significantly enhance firm value. Specifically, the regression results show that a one-unit increase in EDS, SDS, and GDS is associated with a 0.81%, 0.67%, and 0.95% increase in Tobin’s Q, respectively. Governance disclosure has the strongest impact on firm value among the three ESG dimensions. Leverage was found to have a significant negative effect, with a one-unit increase in LEV resulting in an 84.2% decrease in Tobin’s Q. The overall model explains 79% of the variation in firm value (R² = 0.79, Adjusted R² = 0.77), with an F-statistic of 34.50 (p < 0.001), indicating that ESG disclosures jointly have a substantial and statistically significant effect on market valuation. The study concludes that high-quality ESG reporting, particularly in governance, significantly improves firm value in Nigeria’s oil and gas sector. It recommends that corporate managers prioritize integrated ESG practices, maintain moderate leverage levels, and improve transparency to attract investor confidence and enhance market performance. The findings contribute to the literature on ESG-firm value relationships in emerging economies and provide practical insights for investors, regulators, and policymakers.