IMPACT OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) DISCLOSURES ON THE FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

The rising global demand for Environmental, Social, and Governance (ESG) reporting has sparked significant debate about its financial relevance, especially in emerging economies like Nigeria. Despite global trends suggesting a positive ESG and performance relationship, the extent to which ESG disclosure influences firm performance within the Nigerian manufacturing sector remains underexplored. This study investigates the impact of disaggregated ESG components which are environmental, social, and governance disclosures on firm performance, using Economic Value Added (EVAA) as the performance proxy. The study adopts an ex post facto research design, relying on secondary data from 43 listed manufacturing firms in Nigeria over the 2014 to 2023 period. Panel data regression techniques including Fixed Effects, Random Effects, and Least Squares Dummy Variable models were used for analysis, with firm size and market capitalization as control variables. The findings reveal that environmental disclosure has a statistically significant but negative effect on firm performance, indicating that compliance costs may outweigh short term financial benefits. However, both social and governance disclosures were found to have no significant effect on firm performance. These results suggest that ESG reporting, particularly in developing institutional environments, may not yet align with financial value creation. It is recommended that Nigerian firms adopt a more strategic and long-term view of ESG integration, while policymakers provide incentives to ease the financial burden of compliance.