Value Relevance of Environmental Sustainability Information Disclosure

Abstract

To empirically investigate the value relevance of environmental sustainability information disclosure of listed oil and gas firms in Nigeria, this study made use of Ohlson 1995 Valuation Model and a fifteen (15) year time period beginning from year 2006 to year 2020. Further, the study applied carbon emission information disclosure data as the non-financial information and hypothesized that carbon emission information disclosure is value irrelevant in Nigeria. In this study, ex-post facto and descriptive research design based on a panel data set secondarily sourced from annual financial reports of eight (8) listed oil and gas firms in Nigeria was employed. Robust least square regression analysis technique was employed to test the formulated hypotheses. Results obtained from the descriptive statistics reflects a poor carbon emission reporting situation in Nigeria. The result reveals that on average about 2% of the sampled firms disclosed information relating to carbon emission during the period under study. Specifically, the notion that investors perceive the control of carbon emission as severe cost rather than profit was established. This is due to the outcome from the regression result which suggest that stock market investors reactions towards carbon emission disclosure of oil and gas firms in Nigeria is negative. However, this study recommends that to relieve such negative consequences in the capital market, managers of oil and gas firms in Nigeria must take appropriate action to communicate their commitments and efforts genuinely and adequately around carbon reduction to investors. This study contributes to the growing field of environmental sustainability accounting, particularly from a market that is underdeveloped like Nigeria, by offering empirical evidence relating to the relevant value of carbon emission reporting with practical financial implications that will be most helpful to investors.