The association between corporate governance and environmental disclosure quality: evidence from Nigerian listed companies.

Sa'id, Muhammad Atiku

Abstract

Environmental disclosure quality (EDQ) refers to the transparency, accuracy and comprehensive disclosure that companies use to disclose their environmental impact. High EDQ is vital for stakeholders to examine their environmental sustainability. Corporate governance is the principles and system of directing and controlling companies, which plays an important role in improving stakeholder trust through corporate accountability, such as EDQ. Despite corporate governance and EDQ's importance, there is a dearth of literature on corporate governance and EDQ in general and from developing countries in particular. This study advances the literature by investigating EDQ and its association with corporate governance amongst listed Nigerian companies, a country identified as one of the top 20 polluters worldwide on an emissions per capita basis, which increases environmental pollution. The study employs a multi-theory approach, incorporating insights from stakeholder, legitimacy, agency, signalling and resource dependency theories. The research uses a comprehensive hand-collected dataset from various sources for all listed companies on the Nigerian Stock Exchange for the year 2017, a year predating the 2018 code of corporate governance, making it the most extensive dataset in this research area in Nigeria. It employs a weighted self-constructed disclosure index method to measure EDQ. It then uses ordinary least squares (OLS) and stepwise regression analysis to validate the disclosure index and then investigate the association between EDQ and various corporate governance variables after controlling for firm characteristics. The results show low-quality environmental disclosure amongst listed Nigerian companies. Regarding the firm characteristics, the results indicate a highly significant association between firm size, profitability, multinationalism and industry type with EDQ. On the contrary, leverage, liquidity and auditor type have no association with EDQ. Secondly, the results show that board characteristics such as board size, board independence, board meeting frequency, board experience and presence of foreign members have significant positive associations with EDQ. CEO duality has a significant negative association with EDQ. Interestingly, gender diversity has no association with EDQ. Lastly, the results show that ownership structure plays an important role in EDQ. Institutional and managerial ownership have a significant negative association with EDQ. On the contrary, ownership concentration has a significant negative association with EDQ. The findings of this study would likely be of interest to regulators, investors, companies and academic scholarship. For regulators, it will help the Nigerian government understand the quality of environmental disclosure amongst listed companies and direct resources towards tackling the low level of engagement in high-quality disclosure. Investors can use these results to find lower-risk Nigerian-listed companies. Companies can use the results to improve their governance structure and environmental disclosure quality to legitimise their activities within the environment in which they operate. Lastly, the study's results contribute to academic scholarship on corporate governance and environmental sustainability, where such literature is limited due to data availability. The study contributed to two literatures: disclosure literature and governance literature. In terms of disclosure literature, it investigates the quality of voluntary corporate environmental disclosure in one of the top 20 global polluters of metric tonnes of emissions. More importantly, the measure of the quality considers the importance of climate-related financial disclosure in line with the recent development of the Task Force on Climate-Related Financial Disclosures (TCFD) by the Financial Stability Board. It uses a disclosure index with fifty-seven items of environmental information (the highest of its kind) to measure EDQ released in annual, sustainability and website reports. Better corporate governance involves better disclosure, but what constitute this better governance is context dependent. Accordingly, this study contributes to the literature by providing empirical evidence of what constitute better corporate governance amongst Nigerian listed firms. Lastly, the study considers the whole Nigerian market, which makes the results generalisable.

Citation

SA'ID, M.A. 2024. The association between corporate governance and environmental disclosure quality: evidence from Nigerian listed companies. Robert Gordon University, PhD thesis. Hosted on OpenAIR [online]. Available from: https://doi.org/10.48526/rgu-wt-2801169

• Thesis Type: Thesis
• Deposit Date: Apr 22, 2025
• Publicly Available Date: Apr 22, 2025
• DOI: https://doi.org/10.48526/rgu-wt-2801169
• Keywords: Environmental disclosure; Pollution; Corporate governance; Stock market-listed companies; Nigeria
• Public URL: https://rgu-repository.worktribe.com/output/2801169
• Award Date: Oct 31, 2024