Effect of Environmental and Social Reporting on Financial Performance of Environmentally Sensitive Companies in Nigeria

Abstract

This study examined the effect of environmental and social reporting on financial performance of environmentally sensitive companies in Nigeria. The study employed ex-post facto research design. Data obtained from audited financial statements of thirty-seven companies sampled from 2013 to 2019 were analyzed using the Panel random effect regression technique. The result reveals that pollution has a positive significant effect on return on equity, and occupational health and safety has negative but significant effect on return on equity of sampled companies. The environmental and social reporting measures of loss of biodiversity, waste management, training and education, and community commitment has a positive but insignificant effect on financial performance. The study concluded that, at least in the short run, corporate responsibilities of environmentally sensitive companies do not significantly drive financial performance upward but rather constrained it. Therefore, it is recommended that the management of these environmentally sensitive companies should adopt balance investment policies to improve their financial performance than focusing solely on investing in environmental and social reporting.