SUSTAINABILITY REPORTING AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS IN NIGERIA
Keywords:
Environmental Disclosures, Governance Disclosures, Financial Performance, Social DisclosuresAbstract
This study examined the impact of environmental, social, and governance (ESG) disclosures on the financial performance of listed manufacturing firms in Nigeria, utilizing Return on Assets (ROA) and Tobin’s Q as performance metrics. Employing a panel dataset comprising 487 observations, the analysis explores the relationships across different firm sizes, specifically distinguishing between large and small manufacturing firms. Results indicate that environmental disclosures positively influence profitability (ROA), but are associated with a negative impact on market valuation (Tobin’s Q), suggesting a dual role of environmental initiatives. Social disclosures show varied impacts, positively affecting smaller firms’ profitability while demonstrating limited influence on larger firms. Governance disclosures present generally weak relationships with financial performance metrics, with only marginal significance observed for smaller firms in relation to ROA. These findings highlight that while ESG practices may enhance firm credibility and stakeholder relations, their financial impact is context-dependent, varying by firm size and specific performance measure. The study underscores the importance of selective ESG practices tailored to firm characteristics and stakeholder expectations to optimize financial outcomes. Recommendations are provided for corporate and regulatory strategies aimed at supporting sustainable business practices within the Nigerian manufacturing sector.
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