Moderating Effect of Ownership Concentration on Environmental, Social and Governance (ESG) Disclosures and the Value of Listed Manufacturing Companies in Nigeria

Abstract

The harmful consequence from global financial scandals were not only causing financial losses to the stakeholders but it similarly caused systemic consequence to the environment and society at large. This has put firms under sustained pressure to disclose their extra-financial information (or information that can have a material impact on the valuation of firms other than the traditional financial reporting. Accordingly, ownership composition is considered viable governance mechanism towards increased disclosure quality of companies. Thus, the main objective of this study is to examine the moderating effect of ownership concentration on environmental, social and governance reporting and the value of quoted manufacturing companies in Nigeria. The study adopted ex post facto research design. The population of the study comprised of the Sixty (60) manufacturing companies listed on the Nigeria Stock Exchange as at 31^st December, 2022. However, a sample size of 41 companies were used for data collection using a filtering process. Data was extracted from the published audited accounts and financial statements and annual reports of the quoted manufacturing companies in Nigeria from 2013-2022. Firm value was measured using Tobins Q while the study employed multiple regression analysis to test the hypotheses. The result of the random effect model showed that ownership concentration has a positive and significant moderating effect on the relationship between environmental reporting disclosure and firm value. The study also found that ownership concentration has a positive and insignificant effect on the relationship between social disclosure, reporting disclosure and firm value. The study also showed that ownership concentration has positive and significant moderating effect on the relationship between governance reporting disclosure and the value of quoted manufacturing companies in Nigeria. From the findings, the study concluded that ownership concentration is a viable monitoring mechanism for influencing the disclosure of ESG practices for firms aiming for high valuation in the manufacturing sector. From the findings and conclusion, the study recommended that the manufacturing sector should be mandated by the Financial Reporting Council of Nigeria to report on the ESG practices since their activities have far more devastating effects on the environment.