Environmental, Social, and Governance Reporting Evidencing Firm Performance in Emerging Economy
Description
Given the absence of consensus by existing studies, we contended that, traditional investment models were no longer adequate and sufficient in evaluating firm performance. Investors were of diverse interests and channeled their resources to firms which goals and objectives were in tandem with their philosophy while board composition the firm may be determinant of her disposition towards sustainable future. In the light of these, we proposed that: H1: Overall ESG is significantly associated with firm performance H2: Environmental initiatives impact firm performance H3: Social initiatives influence firm performance H4: Governance initiatives is positively associated with firm performance. The study established a non-linear relationship between ESG disclosure and firm performance with a negative coefficient between Overall ESG and firm valuation, but positively associated with profitability. The findings reveal that environmental, social and governance (ESGIDX) disclosures reduced firm valuation and vice-versa but enhanced operational efficiency to boost profitability. Governance indicator (GOV) was found to be crucial to overall ESG disclosure while it also played a significant role towards profitability. The firms’ core objective of shareholders’ wealth maximization might be at variance with sustainable practice as observed in the results. The study obtained ESG scores and financial data relating to the period 2013-2022 from annual reports publicly available on Nigeria Exchange Group (NGX). The dependent variable Firm Performance was measured as TobinQ and Return on Assets (ROA) respectively. The explanatory variables were Overall ESG Index; Environmental Score; Social Score; and Governance Score, while we considered Market Capitalization, Leverage and Firm Size as controlling variables.