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ISSN 2278-2540 | DOI: 10.51583/IJLTEMAS | Volume XV, Issue V, May 2026
Moderating Effect of Corporate Governance on the Relationship
Between Sustainability Reporting and Firm Value of Listed Oil and
Gas Companies in Nigeria
Popoola, Muhammad Lanre, Mustafa, Moa (Prof), Ayeni, Abdulhakeem Adeyemi
Accounting Department, Faculty of Management Science, University of Abuja., Abuja, FCT, Nigeria
DOI:
https://doi.org/10.51583/IJLTEMAS.2026.150500129
Received: 13 May 2026; Accepted: 18 May 2026; Published: 08 June 2026
INTRODUCTION
Background of the study
The modern business environment necessitates continuous organizational adaptation to maintain competitive
value in evolving markets. Firm valuation, conceptualized as the premium investors are willing to pay for
corporate ownership, serves as a comprehensive indicator of both tangible assets and managerial efficacy in
value creation (Massie et al., 2017; Setiadharma & Machali, 2017). Contemporary corporate reputation
management extends beyond financial metrics to incorporate environmental, social, and governance (ESG)
dimensions, with robust non-financial disclosure frameworks becoming increasingly critical for capital
acquisition and shareholder value optimization.
This paradigm shift has occasioned the development of sustainability reporting (SR) as an institutionalized
practice for disclosing organizational impacts across economic, environmental, and social domains (Global
Reporting Initiative, 2017a). As a relatively recent innovation, SR has emerged as a strategic tool for ESG risk
assessment, opportunity identification, and organizational transparency enhancement (Global Reporting
Initiative, 2017). The implementation of SR frameworks facilitates improved strategic planning, operational
adaptability, and business continuity in an era where sustainability considerations significantly influence
corporate decision-making and stakeholder expectations.
Within the Nigerian context, SR adoption remains predominantly voluntary, with mandatory compliance limited
to premium board-listed entities. Current motivations for SR implementation frequently emphasize philanthropic
corporate social responsibility (CSR) initiatives and reputational enhancement, raising concerns about potential
greenwashing practices (Okwuosa, 2024). While extant research demonstrates positive SR-firm value
correlations (Dhaliwal et al., 2011), the contingent nature of this relationship suggests the need to examine
potential moderating variables, particularly corporate governance (CG) mechanisms.
Effective CG systems, comprising structured processes for accountability and transparency, serve as critical
enablers of credible SR implementation (Oyerogba et al., 2024). The integration of robust CG frameworks with
SR practices enhances organizational legitimacy and ethical standing (Krechovská & Procházková, 2014), while
simultaneously mitigating operational, regulatory, and reputational risks (Hallikas et al., 2020; Kalia & Gill,
2023). Furthermore, strong governance architectures promote strategic decision-making horizons consistent with
sustainable business principles (Post et al., 2011).
Despite growing scholarly attention, empirical findings regarding the SR-firm value relationship remain
inconsistent across developed and developing economies. This study seeks to address these discrepancies by
examining the interplay between SR, CG, and firm valuation within Nigeria's strategically vital oil and gas
sector, providing evidence-based insights for regulatory bodies and corporate stakeholders navigating
sustainability transitions.
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Statement of the Problem
In contemporary business environments, sustainable development has emerged as a critical priority for
organizations across diverse sectors (García-Sánchez et al., 2020). This growing focus stems from a combination
of internal organizational drivers and external stakeholder expectations. Modern enterprises now view
sustainability not as a secondary issue but as a fundamental strategic requirement (Dhanda & Shrotryia, 2020).
By incorporating sustainability principles into core business processes, companies can synthesize financial data
with comprehensive environmental, social, and governance metrics. This integrated approach enables more
informed strategic decisions that align with broader organizational objectives (GRI, 2023).
Externally, demonstrated environmental stewardship correlates with improved investor perceptions, market
valuation, and capital access (Dhanda & Shrotryia, 2020). However, critical analysis of Nigerian sustainability
disclosures reveals substantive limitations, with reporting frequently emphasizing community engagement
imagery while omitting material environmental externalities such as hydrocarbon pollution events or industrial
carbon emissions (Okwuosa, 2024). This representational disparity underscores the tension between symbolic
and substantive sustainability implementation.
Contemporary corporate sustainability requires balanced consideration of environmental preservation, social
equity, and economic distribution alongside traditional shareholder value maximization (GRI, 2017b). The
current research addresses this imperative by investigating how comprehensive sustainability reporting,
moderated by effective governance structures, influences firm valuation in Nigeria's petroleum sector - an
industry facing mounting sustainability pressures amid its economic significance.
The contemporary business landscape demands expansive corporate reporting that transcends traditional profit
metrics to encompass ESG impacts, aligning with IFRS mandates for comprehensive disclosures (Atoyebi &
Okpe, 2021). While prior studies (e.g., Bello & Abdullahi, 2024; Aondoakaa, 2015; Joseph et al., 2017) have
examined aspects of sustainability reporting, significant gaps persist in the Nigerian context. Existing research
often narrows its focus to isolated dimensions of sustainability (e.g., environmental or social reporting) or
employs proxy variables (e.g., Nnamani et al., 2017’s TPCTA/TETA) that inadequately capture the holistic GRI
framework.
Moreover, mixed findings ranging from positive to negative or null effects underscore the need for further
investigation on sustainability reporting and firm value. Anchored in Stakeholder Theory (Freeman, 1984) and
Agency Theory (Jensen & Meckling, 1976), this study addresses these gaps by evaluating how all three GRI
aligned sustainability pillars (environmental, social, economic) collectively influence firm value, while
examining the moderating role of corporate governance for example audit committees in mitigating
greenwashing risks (Okwuosa, 2024) and enhancing SR credibility. By focusing on Nigeria’s oil and gas sector,
this research aims to reconcile conflicting evidence and provide empirical clarity for policymakers and
practitioners navigating the sustainability-value nexus.
Objectives of the Study
The primary objective is to investigate the moderating effect of corporate governance on the relationship between
sustainability reporting and firm value of listed oil and gas companies in Nigeria. The specific Objectives are to:
i. Examine the extent to which sustainability reporting, encompassing social, economic, and
environmental disclosures, influences the firm value of listed oil and gas companies on the Nigerian
Exchange Group (NGX).
ii. Analyse how corporate governance mechanisms, specifically audit committee effectiveness,
moderate the relationship between sustainability reporting (social, economic, and environmental
disclosures) and firm value of listed oil and gas companies on the NGX.
iii. Assess potential variations in the moderating effect of corporate governance across different firm size
categories within the listed oil and gas companies on the NGX.
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Research Questions
To achieve these objectives, the following research questions will guide this study:
i. Does sustainability reporting, encompassing social, economic, and environmental disclosures, have a
significant impact on the firm value of listed oil and gas companies on the NGX?
ii. To what extent does corporate governance (audit committee effectiveness) moderate the relationship
between sustainability reporting (social, economic, and environmental disclosures) and firm value of
listed oil and gas companies on the NGX?
iii. Are there any significant differences in the moderating effect of corporate governance (audit committee
effectiveness) on the relationship between sustainability reporting (social, economic, and environmental
disclosures) and firm value across various firm size categories within the listed oil and gas companies on
the NGX?
Research Hypotheses
The following null hypotheses will be tested:
H
0
1: There is no significant relationship between sustainability reporting (social, economic, and
environmental disclosures) and the firm value of listed oil and gas companies on the NGX.
H
0
2: Corporate governance (Audit committee effectiveness) does not significantly moderate the relationship
between sustainability reporting (social, economic, and environmental disclosures) and firm value of
listed oil and gas companies on the NGX.
H
0
3: Firm size does not significantly moderate the effect of audit committee effectiveness on the relationship
between sustainability reporting (social, economic, and environmental disclosures) and firm value across
different firm size categories within the listed oil and gas companies on the NGX.
Scope of the Study
This study investigates how corporate governance moderates the relationship between sustainability reporting
and firm value among Nigeria's listed oil and gas companies, using Tobin's Q (market-to-book ratio) as the
primary valuation metric. This measure effectively captures investor perceptions of intangible assets like
sustainability performance (Emeka-Nwokeji & Osisioma, 2019) and reflects long-term market expectations
better than accounting-based metrics. Analyzing panel data (2010-2024) from audited financial statements, the
research employs specific operational measures for sustainability disclosures (environmental, social, economic)
and governance mechanisms (audit committee’s effectiveness) to assess their interactive effects on value
creation in Nigeria's pivotal petroleum sector.
Significance of the Study
This research provides critical insights into the complex relationship between corporate governance,
sustainability reporting, and firm value, with a specific focus on Nigeria’s oil and gas sector. By demonstrating
how robust corporate governance enhances the credibility and effectiveness of sustainability disclosures, the
study underscores the role of ethical business practices in driving long-term value creation. These findings hold
substantial relevance for multiple stakeholders:
For investors, the study offers a framework for evaluating firms that integrate strong governance with
transparent sustainability reporting, enabling more informed capital allocation decisions that favour sustainable
and ethically managed enterprises. For regulators, the research highlights the need for policies that promote
rigorous governance standards and comprehensive sustainability disclosures, ensuring greater accountability in
the sector. For corporate management, the findings emphasize the strategic importance of aligning governance
structures with sustainability objectives to enhance reputation and stakeholder trust.
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Finally, this study contributes to the broader discourse on sustainable business practices by providing empirical
evidence that supports the integration of governance and sustainability reporting as key drivers of firm value in
high-impact industries.
LITERATURE REVIEW
Introduction
The research began with a thorough elucidation of essential topics, including sustainability reporting and its
components, company value, and corporate governance processes. The following section of the study examines
key theoretical frameworks, including stakeholder theory, legitimacy theory, signalling theory, Agency theory
and institutional theory, which form the basis of the link between sustainability reporting and business value.
This paper analyses empirical research that evaluates the moderating influence of corporate governance on the
correlation between sustainability reporting and firm value. The emphasis is on elucidating evidence regarding
the moderating influence of corporate governance on sustainability reporting and its specific components,
including environmental, economic, and social factors, on company value. This literature analysis aims to
synthesize conceptual insights and empirical evidence about the moderating influence of corporate governance
on the relationship between sustainability reporting and company value.
Conceptual Reviews
The introduction outlines the essential conceptual framework, which is further elaborated in the next sections to
explain the moderating effect of corporate governance on sustainability reporting and value for the company.
Firm Value
The worth of a firm is a vital measure of a company's financial well-being and shareholder wealth. Fundamental
analysis typically emphasizes corporate value to evaluate a company's entire performance. Companies endeavour
to sustain their business viability and augment their firm value through strategic decision-making that
immediately influences their worth (Ishak et al, 2024).
Kurshev and Strebulaev (2015) assert that Firm Value (FV), also referred to as business or corporate value, is
essential in finance, economics, and business management. It signifies a company's whole value or economic
worth. The core of maximizing firm value is to enhance its financial worth, consequently increasing investors'
wealth through a rise in the market value of its shares. Clearly conveying a company's commitment to sustainable
and responsible business practices is crucial for attracting investments, reducing risks, and improving financial
performance, so maximizing its market value.
The calculation of Firm Value entails the aggregation of the actual market value (MV) of common stock and the
projected market values of preferred stock and debt (Morck et al., 1988). The complex nature of assessing Firm
Value involves diverse approaches and measurements, each providing distinct insights into a company's
valuation. These metrics are essential for investors, financial analysts, and decision-makers aiming to attain a
thorough comprehension of a company's worth.
A variety of criteria have been utilized to assess Firm Value, highlighting its complexity. The criteria encompass
firm size, as noted by Hassan and Musa (2022); Tobin's Q (Marvadi, 2015; Emeka-Nwokeji & Osisioma, 2019;
Onoh et al., 2023); share price, as discussed by Echobu et al. (2022); and Economic Value Added (EVA), as
examined by Wijesinghe et al. (2019). These diverse criteria jointly enhance the understanding of a company's
Firm Value, allowing stakeholders to make educated decisions based on a thorough evaluation of its economic
worth.
Sustainability Reporting
Although a globally accepted definition of sustainability reporting does not exist, some experts and organizations
have proposed their interpretations. Berthelot et al. (2012) perceive it as a voluntary disclosure of a company's
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sustainable development efforts. Wensen et al. (2011) characterize it as an assessment and revelation of business
performance in environmental, social, and economic dimensions.
Khaveh et al. (2012) offer a more thorough definition, highlighting the practice of measuring, revealing, and
ensuring accountability to stakeholders on organizational performance in relation to sustainable development.
The Dow Jones Sustainability Index, as described by KPMG (2008), characterizes sustainability reporting as a
business strategy that generates long-term shareholder value through the management of economic,
environmental, and social risks and opportunities.
As per GEP (2024), sustainability reporting constitutes a form of non-financial reporting that enables companies
to convey their progress on diverse sustainability criteria, including environmental, social, and governance
metrics, as well as the risks and impacts they may face currently or in the future.
The primary objective of sustainability reporting is to encourage concrete actions regarding projects.
Sustainability reporting allows companies to communicate the good and negative impacts of their operations on
the environment, society, and economy, thereby setting priorities. Organizations derive numerous competitive
advantages from integrating sustainability into their fundamental strategies.
Furthermore, the Nigerian Stock Exchange (NSE, 2018) asserts that sustainability and ESG are used
interchangeably, and for the purposes of the Sustainability Disclosure Guidelines (SDG), both terms encompass
the comprehensive array of economic, environmental, social, and governance factors that can influence a
company's capacity to implement its business strategy and generate or diminish value. Kozlowski, Searcy, and
Bardeck (2015) and Harangozó, Széchy, and Zilahy (2016) asserted that sustainability reporting entails revealing
a company's beneficial or bad effects on the environment, society, and economy. Sustainability reporting (SR),
encompassing the disclosure of environmental, social, and economic data, has emerged as a crucial element of
corporate transparency and responsibility (KPMG, 2023).
Jones et al. (2007) contend that sustainability reporting can address evolving public expectations and possibly
reduce the necessity for heightened governmental intervention. Sustainability accounting, which incorporates
social, environmental, and economic factors into company reporting, is strongly associated with sustainability
reporting. The Organisation for Economic Co-operation and Development (OECD, 2011) defines sustainability
as the maintenance of positive trends in economic growth and development. When an organization incorporates
these concepts into a formal report, it is participating in sustainability reporting.
The Global Reporting Initiative (GRI, 2017) defines it as the disclosure of a company's economic, environmental,
and social impacts, alongside its values, governance structure, and strategic alignment with sustainable
development. This study utilizes the GRI definition, as it incorporates the three fundamental components of
sustainability: environmental, social, and economic. These dimensions will function as the independent variables
in this study.
Corporate Governance
The GRI (2011) defines a sustainability report as a document issued by a firm or organization detailing the
economic, environmental, and social effects of its daily operations. The OECD defines corporate governance as
a complex interaction of laws, procedures, and processes that directs and controls a business. It outlines the
allocation of rights and obligations among stakeholders, including the board, management, shareholders, and
other relevant entities. This structure guarantees efficient decision-making, accountability, and transparency
inside the organization.
The Chartered Governance Institute UK and Ireland (2024) underscores that a well-structured corporate
governance framework is vital for cultivating trust and confidence among stakeholders. It delineates roles, duties,
and decision-making processes, thereby mitigating the risk of conflicts of interest and ethical violations.
Furthermore, strong governance procedures can enhance financial performance by facilitating efficient capital
allocation, strategic decision-making, and risk management (Investopedia, 2024).
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The importance of corporate governance transcends internal functions, impacting a company's outward
interactions with investors, creditors, consumers, employees, and the wider community (Bashir et al., 2018).
Organizations can manage risks, boost performance, and create long-term value by implementing effective
governance processes (Ezazi et al, 2011).
In recent years, corporate governance has attained worldwide significance. Countries globally have
acknowledged its significance in fostering economic growth, advancing sustainable development, and protecting
investment interests. As firms navigate more complex and dynamic contexts, the implementation of solid
corporate governance processes is essential (Grantham, 2020). This study will investigate the moderating
influence of corporate governance measures, including board independence and audit committee efficacy, on the
connection between sustainability reporting and business value.
2.3 Conceptual Frame work:
[Dependent Variables.] [Moderator] [Independent Variable]
┌───────────────┐ ┌──────────┐ ┌──────────────┐
│ Firm Value │ │ Corporate │ │Sustainability Reporting │
│Tobin’s Q │ ─┤ Governance├──▶ │ ENRD, SORD │
│ │ │ (ACE.) │ │ ECRD │
└───────────────┘ └──────────┘ └──────────────┘
▲
│
[Control Variable: Firm Size]
Theoretical Review
This study is grounded in four complementary theoretical perspectives that explain the relationship between
sustainability reporting (SR), corporate governance (CG), and firm value (FV):
Stakeholder Theory
Building on Freeman's (1984) foundational work, stakeholder theory posits that corporations operate within an
ecosystem of interdependent relationships with various constituencies, including shareholders, employees,
communities, and environmental systems. The theory suggests that SR serves as a critical communication
channel that: (1) enhances transparency (Gibler et al., 2013), (2) mitigates stakeholder conflicts (Phillips, 2003),
and (3) facilitates access to essential resources (Freeman, 2010). By systematically disclosing ESG performance
(KPMG, 2023), companies demonstrate commitment to stakeholder welfare, thereby building trust and securing
long-term support (Deegan & Blomquist, 2006).
Legitimacy Theory
Suchman's (1995) legitimacy theory argues that organizations must align their operations with societal
expectations to maintain their "license to operate." SR functions as: (1) a symbolic demonstration of compliance
with environmental and social norms (Cho & Patten, 2007), (2) a risk management tool against reputational
threats (Guthrie & Parker, 1989), and (3) a mechanism to secure regulatory and community support (De Villiers
et al., 2016). High-quality disclosures enhance perceived legitimacy, leading to improved market positioning
and financial access (Porter & Kramer, 2006).
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Signalling Theory
Drawing from Spence's (1978) work, signalling theory explains how SR conveys private information about firm
quality to capital markets. Credible sustainability reports: (1) differentiate responsible firms from competitors
(McCarthy, 2017), (2) reduce information asymmetry (Dhaliwal et al., 2011), and (3) attract quality-sensitive
investors. The theory emphasizes that CG structures (e.g., independent audit committees) enhance signal
credibility by minimizing greenwashing risks (Cho & Patten, 2017).
Institutional Theory
Scott and Davis (2007) demonstrate how organizations conform to institutionalized practices within their
operating environments. SR adoption reflects: (1) coercive pressures (regulatory requirements), (2) mimetic
tendencies (industry benchmarking), and (3) normative expectations (professional standards). The theory
predicts stronger SR-FV relationships in institutional contexts with robust sustainability norms (Ioannou &
Serafeim, 2015), where CG systems help firms adapt to institutional demands (Buhr & Winn, 2008).
Agency Theory
Jensen and Meckling's (1976) agency theory provides critical insights into CG's moderating role. The framework
identifies: (1) inherent conflicts between managers (agents) and shareholders (principals) regarding SR
investments, (2) information asymmetry in sustainability performance, and (3) the monitoring function of
governance mechanisms. Effective CG structures (e.g., independent boards, active audit committees) mitigate
agency costs by: (1) aligning managerial incentives with long-term value creation, (2) ensuring accurate SR
disclosures, and (3) preventing resource diversion (Eklemet et al., 2023). The theory particularly explains how
strong governance enhances the value relevance of SR in emerging markets where agency problems are
pronounced.
Theoretical Framework
This study employs Agency Theory and Stakeholder Theory to examine how corporate governance (CG)
strengthens the relationship between sustainability reporting (SR) and firm value (FV). Agency Theory (Jensen
& Meckling, 1976) explains how CG mechanisms like independent audit committees mitigate manager-
shareholder conflicts by aligning sustainability investments with long-term value creation (Eklemet et al., 2023).
Stakeholder Theory (Fyall et al., 2012) complements this by showing how effective CG ensures SR credibility
among diverse stakeholders, transforming sustainability commitments into competitive advantage.
In Nigeria's emerging market context, robust CG plays a particularly vital moderating role due to weak
institutional oversight. Strong governance structures compensate for regulatory deficiencies by: (1) validating
SR authenticity in greenwashing-prone environments, (2) bridging institutional monitoring gaps, and (3)
building stakeholder trust. This dual theoretical framework positions CG as both an agency conflict resolver and
stakeholder value enabler, explaining how well-governed Nigerian firms convert sustainability efforts into
financial performance despite challenging institutional conditions.
Empirical Review:
Numerous empirical studies have been undertaken to examine the moderating influence of Sustainability
Reporting on business value across various sectors. This review synthesizes the key findings from prior research.
Sustainability Reporting and Firm Value
Sustainability reporting has emerged as a strategic imperative that significantly influences corporate valuation
and market performance. Empirical studies demonstrate a strong positive relationship between comprehensive
sustainability disclosures and Tobin's Q, a key indicator of market valuation (Ioannou & Serafeim, 2012). Firms
with robust sustainability practices tend to achieve higher Tobin's Q ratios, suggesting that investors perceive
them as more attractive and lower-risk investment opportunities (Orlitzky et al., 2003).
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This valuation premium stems from several factors. First, effective sustainability reporting signals strong
management quality and ethical business practices to capital markets. Second, it demonstrates the organization's
commitment to addressing broader societal concerns, which enhances stakeholder confidence. These combined
effects contribute to improved market perceptions of the firm's long-term viability and growth potential,
ultimately translating into higher valuation multiples (Flammer, 2015).
The evidence suggests that sustainability reporting serves as an important mechanism for value creation in
contemporary capital markets, with investors increasingly incorporating environmental, social and governance
(ESG) factors into their valuation frameworks. This trend reflects the growing recognition that sustainable
business practices contribute to both financial performance and risk mitigation.
Research examining the relationship between sustainability reporting (SR) and firm value, as measured by
Tobin's Q, has yielded mixed findings. Emeka-Nwokeji and Osisioma (2019) conducted a longitudinal analysis
of 93 Nigerian non-financial firms from 2006 to 2015, employing pooled OLS regression to assess the impact
of SR components on market value. Their results revealed a significant positive association between SR and firm
value, with environmental and governance disclosures demonstrating stronger effects than social disclosures.
These findings suggest that integrating comprehensive sustainability metrics into corporate reporting
frameworks can enhance long-term value creation.
Conversely, Atanda et al. (2021) observed contrasting results in their study of Nigerian deposit money banks
(2014–2018). Using fixed-effect regression analysis of audited financial data, they found that SR disclosures
exerted a significant negative influence on firm value. This divergence in outcomes may reflect sector-specific
characteristics, as banking institutions face different stakeholder expectations and regulatory pressures compared
to non-financial firms. The study highlights the potential for SR implementation costs to outweigh short-term
benefits in certain industries.
These contradictory findings underscore the contextual nature of SR's value relevance, emphasizing the need for
industry-specific investigations into the SR-FV relationship.
Mohamed and Younis (2023) investigated the influence of social responsibility on the firm value (Tobin's Q) of
60 publicly traded companies in the Saudi Stock Market over a five-year period from 2017 to 2021. Multiple
regression research indicated that SR significantly influences the valuation of companies listed on the Saudi
Stock Market, thereby recommending the establishment of an accounting standard for SR disclosure.
Onoh et al. (2023) investigated the impact of sustainability disclosure practices on the firm value (Tobin's Q) of
ten publicly listed Oil and Gas Companies in Nigeria, utilizing data collected over an eleven-year period (2010
to 2020) and analyzed through panel regression with a random effects model. The analysis indicates that
environmental and economic disclosures contribute to value creation, however social disclosures hinder value
creation for Oil and Gas businesses in Nigeria. The study advocated for complete adherence to SR laws and
regulations to enhance long-term value.
Recently, Rahim et al. (2024) examined the impact of sustainability report (SR) publication on the firm value of
mining businesses listed on the Indonesia Stock Exchange (IDX). This study utilized data from the financial
reports of mining businesses listed on the Indonesia Stock Exchange from 2018 to 2022, employing a purposive
sampling technique with a sample size of 50 companies. Various multiple linear regression techniques were
employed. The findings indicate that the economic dimension of the sustainability report (SR) variable
significantly influences company performance. The environmental component of the SR variable is insignificant
for financial performance when assessed through the return on assets (ROA) ratio, although it strongly impacts
financial performance when evaluated using the return on equity (ROE) ratio. The social dimension of the SR
variable significantly impacts financial performance as measured by the return ratio.
Effective sustainability reporting offers insights into environmental, social, and economic activities, which are
increasingly vital for long-term value development and overall organizational success. Empirical research
indicates a positive correlation between SR and EVA (Ikechukwu & Blessing, 2020), showing that firms
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dedicated to sustainable practices typically produce greater EVA. This may result from augmented brand
reputation, superior stakeholder interactions, or greater risk management. Conversely, several studies have not
demonstrated a substantial direct association between SR practices and EVA.
Ikechukwu and Blessing (2020) investigate the impact of SR on the EVA of 21 publicly traded manufacturing
firms in Nigeria from 2008 to 2019. The acquired data was analysed via Panel Least Squares (PLS) regression.
The findings indicate that all SR components exert a favourable and significant influence on the EVA of the
studied enterprises. Consequently, the study advocated for investing in sustainability initiatives to enhance the
company's reputation and augment its economic value.
Iliemena et al. (2023) assessed the impact of SR components on the EVA of 37 publicly traded manufacturing
firms in Nigeria, utilizing secondary data from 2012 to 2020, analysed through static regression (Random effect).
The findings indicated that all SR components positively influence the EVA of the studied companies, with the
exception of the environmental component, which does not significantly affect EVA.
Gonçalves et al. (2023) investigate the relationship between social responsibility (SR) and the economic
performance (EVA) of 600 publicly traded firms in STOXX Europe during a nine-year period from 2012 to
2020. The data were analysed utilizing OLS, fixed and random effects regressions, along with a two-step system
GMM estimator. All evaluations indicated that SR had a good and significant effect on EVA and suggested a
transition from the traditional reporting system to the integration of fundamental sustainability activities to
enhance economic performance.
Schiessl et al. (2022) assess the influence of CSR on the EVA of 4,287 major global corporations, in
contradiction to the aforementioned findings. Data for the study was obtained from Eikon, a platform from
Thomson Reuters, and subsequently analysed. The results indicate that CSR has a detrimental and considerable
effect on the EVA of these companies.
Atoyebi and Okpe (2021) investigated the influence of corporate sustainability reporting on the financial
performance of publicly listed manufacturing firms in Nigeria. The research employed ROA as the dependent
variable, while economic, social, environmental, and governance disclosures served as the independent factors.
The study employed a correlational research design to delineate the statistical relationship between the variables
and to assess the effects of independent variables on the dependent variable. Data were obtained from the annual
reports and financial statements of the 31 selected publicly listed manufacturing firms in Nigeria. The research
employed generalized least squares (GLS) to evaluate the hypotheses. The results indicate that economic and
environmental disclosures significantly enhance the financial performance of publicly listed industrial firms in
Nigeria. Environmental disclosures exert the most influence, whereas social disclosures demonstrate the least,
exhibiting a substantial negative impact during the analysed period
The moderating effect of Corporate Governance on Sustainability Reporting and Firm Value
There is a paucity of empirical information about the moderating influence of Corporate Governance on the
relationship between Sustainability Reporting and Firm Value, with studies undertaken in both developed and
developing nations. In Nigeria, few studies have been undertaken on this matter.
Fuadah et al. (2022) examined the impact of ownership structure on ESG disclosure, firm valuation, and business
performance in Indonesia, focusing on the moderating effect of audit committees. The research utilized a
quantitative methodology, examining secondary data from 140 publicly traded businesses on the Indonesia Stock
Exchange from 2018 to 2020. The study employed partial least squares structural equation modelling to examine
the effects of four ownership structures: foreign, public, state, and family ownership.
Rahman et al. (2024) employed profitability as a moderating variable in the relationship between social
responsibility (SR) and firm value (FV) of eleven (11) publicly listed manufacturing companies in Indonesia
over a five-year period from 2016 to 2020. The acquired secondary data was analysed using multiple regression.
The analysis reveals that the disclosure of social responsibility significantly influences firm value (Tobin's Q),
and that profitability enhances the beneficial effect of social responsibility on firm value.
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This research conducted by Iskandar et al. (2023) analysed the influence of the quality and quantity of
sustainability disclosures on business value in Indonesia, while assessing the moderating effect of good corporate
governance (GCG). This study utilized a cross-sectional dataset of companies listed on the Indonesian Stock
Exchange from 2017 to 2021 to investigate if Good Corporate Governance (GCG) enhances the association
between sustainability disclosures and firm value.
Iskandar et al. (2023) investigate the moderating effect of effective corporate governance on the relationship
between the quality and quantity of sustainability reporting and firm value (Tobin's Q) of publicly listed
Indonesian companies over a five-year period. Corporate governance was represented by the board of
commissioners' size, the ratio of independent commissioners, and the frequency of audit committee meetings.
Multiple linear regression was employed for analysis, demonstrating that SR quality and quantity strongly
influence Tobin's Q, but only Board Independence significantly moderates the relationship between SR and FV.
Novitasari and Puspawati (2022) investigate the moderating influence of financial performance (ROA) on the
relationship between corporate governance (CG) and corporate social responsibility (CSR) and firm value (FV)
of eighty-two (82) publicly listed Indonesian firms in 2020. The analysis utilizing multiple linear regression
revealed that the audit committee, as a corporate governance proxy, significantly affects firm value, and that
return on assets moderates the impact of corporate governance on firm value. Likewise, the Independent board
of commissioners and CSR do not influence FV, ROA cannot mitigate the impact of the audit committee, and
FP cannot moderate the effect of CSR on FV. Employing Chief Executive Officer Power (CEOP) as a
moderating variable.
Na et al. (2022) investigate the relationship between the quality of Corporate Social Responsibility (CSR)
disclosure and financial performance (FP), while also exploring the moderating effect of CEO tenure on the
relationship between CSR and Firm Value (FV) among 3,248 Chinese publicly listed companies over a seven-
year period (2014 to 2020). The data was analysed using OLS regression. The findings indicated that SR has a
favourable and significant effect on FP, but CEO power adversely affects the relationship between CSR and both
FP and FV.
Duan et al. (2023) investigated the correlations between ESG performance and corporate values, focusing on the
mediating influence of financial restrictions and the moderating effect of R&D investment intensity. The
research sample comprises imbalanced panel data from listed manufacturing businesses in Shanghai and
Shenzhen A-shares, spanning from 2009 to 2021, totalling 16,185 observations. This study empirically examines
how ESG performance influences the enterprise value of manufacturing firms utilizing STATA 16.0 software.
The findings indicate that the ESG performance of manufacturing enterprises significantly enhances company
value. Financing limitations serve as a partial middleman between ESG performance and company value. The
intensity of R&D expenditure negatively moderates the association between ESG performance and the enterprise
values of manufacturing enterprises. The heterogeneity analysis reveals that the positive effect of ESG
performance on corporate value is more significant in eastern China, among non-state-owned enterprises, and
within significantly polluting industries.
Khunkaew et al. (2023) examined the impact of social responsibility (SR) and gender diversity on corporate
performance, specifically profitability and value, within the ASEAN region, encompassing Thailand, Malaysia,
Indonesia, and the Philippines, over a decade (2010 to 2019). Profitability was measured using return on assets
(ROA), while firm value was assessed through Tobin's Q. The analysis, conducted via logit regression, revealed
that SR has a positive and significant effect on both profitability and firm value, with gender diversity moderating
these relationships.
Recently. Bello and Abdullahi (2024) examined the moderating effect of corporate governance on the
relationship between sustainability reporting and the firm value of publicly listed manufacturing companies in
Nigeria. Secondary data for 36 chosen organizations was sourced from the Nigerian Exchange Group (NGX)
database for a period of eleven years, from 2012 to 2022, and analysed using descriptive statistics and a two-
step GMM approach. The findings indicated that SR has a positive and significant effect on EVA, while it does
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not affect Tobin's Q. Additionally, the research showed that none of the added CG mechanisms had a moderating
effect on either of the FV proxies utilized.
RESEARCH METHODOLOGY
Research Design
The research design selected for this study is ex-post facto. According to Kerlinger (1970), ex-post facto
research, also referred to as causal comparative research, is utilized when the researcher seeks to establish a
cause-and-effect relationship between independent and dependent variables to determine a causal relationship
between them. This particular research design was chosen because of its suitability for this specific investigation.
Population of the Study
The population of this study consists of all the listed Oil and Gas companies on the Nigerian Exchange Group
(NGX) as at 26th of July 2024. The total number of Oil and Gas Companies on this date was nine (9).
Sample Size and Sampling Technique
The sample size for the study is Seven (7) Oil and Gas Companies listed on the NGX, drawn from the population
shown in table 3.1 above, using judgmental sampling technique. The choice of judgmental sampling technique
was to capture the effect of sustainability reporting, corporate governance on firm value for the period of fifteen
(15) years. These periods emphasized and greatly brought to the limelight the importance of sustainability
reporting. In order for the analysis to cover the scope, only Oil and Gas Companies that were listed upward of
fifteen years and above were selected.
Source and Method of Data Collection
The research utilized secondary data sourced from the financial statements and annual accounts of the sampled
Oil and Gas Companies for the period 2010 to 2024 (26
th
July, 2024). The information relating to the TQ, SORD,
ECRD, ENRD, ACE and FSIZE were computed from the time series and cross-section data that were collected.
Techniques for Data Analysis:
The research utilized multiple regression analysis. The researcher applied the Generalized Least Square (GLS)
for the analysis of the panel data that were both cross-sectional and time series in nature. The GLS estimation is
an efficient method for estimating the unknown coefficients of a linear regression model when the observations
have unequal variance and there is a certain degree of correlation between the observations (Baltagi, 2011). It
was used because it relaxed some of the assumptions of the OLS regression, specifically the assumption of
normality of data, making it suitable for the present study.
Empirical Model Specification:
This study employs Tobin's Q ratio as a proxy for firm value. To investigate the moderating effect of corporate
governance on sustainability reporting and firm value, environmental, social, and economic reporting indices,
based on GRI G4 guidelines, are utilized as independent variables. Board Independence and Audit committee
effectiveness are the moderators. The Firm size and leverage are included as control variables to account for
differences in reporting levels across firms of varying sizes. This approach aligns with the findings of Awan
(2018), who demonstrated a strong correlation between firm size and firm value.
To examine the direct relationship between sustainability reporting and firm value, we employ the following
linear regression model:
TQit = β₀ + β₁SORDit + β₂ECRDit + β₃ENRDit + εit-------------- (1) (Base model)
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The next model investigates the moderating effect of corporate governance (Audit Committee effectiveness) on
the relationship between sustainability reporting (Social reporting disclosure, Economic reporting disclosure and
Environment reporting disclosure) and firm value (Tobin’s Q):
TQit = β₀ + β₁SORDit + β₂ECRDit + β₃ENRDit + β
5
SORD*ACEit + β
6
ECRD*ACEit + β
7
ENRD*ACEit + εit--
---------------------(2) (Moderation model)
The subsequent model incorporated firm size as a control variable to analyze the moderating effect of corporate
governance (Audit Committee effectiveness) on the relationship between sustainability reporting (comprising
social, economic, and environmental disclosures) and firm value (measured by Tobin's Q).
TQit = β₀ + β₁SORDit + β₂ECRDit + β₃ENCRDit + β
4
SORD*ACEit + β
5
ECRD*ACEit + β
6
ENRD*ACEit +
β
7
FSIZEit + εit-----------------------(3) (Full model)
Where:
TQi,t = Tobin’s Q
β0= constant term
β
1
SORDit = Social Reporting Disclosure
β
2
ECRDit = Economic Reporting Disclosure
β
3
ENRDit = Environmental Reporting Disclosure
β
4
ACEit = Audit committee effectiveness
β
5
FSIZEit = Firm size
εi,t; = error term
β
1
, β
2
, β
3
, β
4
, & β
5
= beta coefficient
Table 3.3: Measurement of Variable
Variable
abbreviation
Variable
definition
Measurement
Estimate
Expected
relationship
Source
TQ
Tobin’s Q
Dependent
Variable
Market
capitalisation
plus total debts
divided by
total asset
\
(Umeh et al., 2020;,
Onoh et al., 2023)
SORD
Social
Reporting
Disclosure
Independent
Variable
Average
aggregate
disclosure
level using 1
and 0 for
disclosure and
non-
disclosure,
respectively.
+
(Khan et al.,202, Farisyi et
al.,2022, Babangida,2023,
Fatma et al.,2019 and
Ratanacharoenchai &
Rachapradit, 2017).
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ECRD
Economic
Reporting
Disclosure
Independent
Variable
Average
aggregate
disclosure
level using 1
and 0 for
disclosure
and non-
disclosure,
respectively.
+
(Khan et al.,202, Farisyi
etal.,2022,
Babangida,2023,
Fatma et al.,2019 and
Ratanacharoenchai &
Rachapradit, 2017).
ENRD
Environmental
Reporting
Disclosure
Independent
Variable
Average
aggregate
disclosure
level using 1
and 0 for
disclosure and
non-
disclosure,
respectively.
+
(Khan et al.,202, Farisyi et
al.,2022, Babangida,2023,
Fatma et al.,2019 and
Ratanacharoenchai &
Rachapradit, 2017).
ACE
Audit
Committee
Effectiveness
Moderating
Variable
Number of
audit
committee
meetings held
during the
year.
+
(Alqatamin, R. M.,2018).
FSIZE
Firm size
Control
Natural Log of
Total Assets
+
(Ucheagwu et al.,
2019,Awan,2018,Nekhili,
et al.,2017, Chang, 2015)
Source: Researcher’s compilation, 2025.
Data Presentation and Analysis
Introduction
This section presents the data and empirical analysis of the moderating effect of corporate governance on
sustainability reporting firm value of selected oil and gas companies listed on the Nigeria Exchange Group. The
section begins with a descriptive analysis of the data, before conducting a preliminary analysis using Panel
ordinary least Square (POLS) estimator. The POLS estimator is diagnosed for various specification issues, and
appropriate correction made to the model.
Descriptive Analysis
The descriptive analysis explores the data for its distribution, centralisation, and dispersion pattern. Thus,
measure of central tendency (mean and median), dispersion (variance and standard deviation), bivariate
correlation matrix, and distribution statistics (i.e. skewness, kurtosis, normality test) are reported.
Summary Statistics
Table 4.1 report the summary statistic with a focus on the mean, median, standard deviation, minimum and
maximum value. The test also reports a test for deviation from the normality of each variable considered in this
study.
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Table 4.1: Summary Statistics
VARIABLE
OBS.
MEAN
MED
MIN
MAX
STD.
DEV.
SKEW
KURT
JB
JB
PROB.
LOGTQ
105
2.444
2.726
-
0.705
4.2337
1.2138
-1.3526
4.0077
36.5
0.0000
SORD
105
0.857
1
0
1
0.3516
-2.0412
5.1667
93.5
0.0000
ECRD
105
0.676
1
0
1
0.4702
-0.7531
1.5671
18.9
0.0001
ENRD
105
0.276
0
0
1
0.4493
1.00113
2.0023
21.9
0.0000
ACE
105
3.743
4
0
7
1.1096
-0.795
5.2511
33.2
0.0000
FSIZE
105
7.88
7.763
6.943
9.7189
0.534
1.31689
4.7587
43.9
0.0000
Source: Researcher’s Compilation 2025
The analysis indicates that the firm value, measured by Tobin's Q (LOGTQ), varies from -0.705 to 4.2337, with
an average firm value of 2.444. The skewness, kurtosis, and Jarque-Bera statistic indicate the non-normality of
the cross-sectional time series variable present in the data. The summary statistics indicate that most of the
selected oil and gas companies engage more in social reporting disclosure (SORD), with an average disclosure
index of 0.86, followed by economic reporting disclosure (ECRD), which has an average disclosure index of
0.68. Environmental reporting disclosure (ENRD) ranks lowest, with an average disclosure index of 0.28. The
effectiveness of the audit committee (ACE) is reflected in an average of 3.74 meetings held annually, with a
maximum of 7 meetings recorded. The data indicates that firm size ranges from 6.94 to 9.72, with an average
size of 7.88.
Correlation Matrix
The correlation matrix is utilised to evaluate the degree of association between the dependent and independent
variables in the study, as well as among the independent variables. The relationships among the study variables
are outlined below.
Table 4.2 Correlation Matrix
VARIABLES
LOGTQ
SORD
ECRD
ENRD
ACE
FSIZE
LOGTQ
1.00
SORD
-0.11
1.00
ECRD
0.19
0.59
1.00
ENRD
0.29
0.25
0.29
1.00
ACE
0.02
-0.10
-0.12
-0.20
1.00
FSIZE
0.16
0.22
0.35
0.26
0.18
1.00
Source: Researcher’s Compilation, 2025
Table 4.2 reveals a strong positive correlation between Economic Reporting Disclosure (ECRD) and Social
Reporting Disclosure (SORD). This finding suggests a potential association between economic development and
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a higher level of social responsibility in corporate reporting. Furthermore, a moderate positive correlation was
observed between Environmental Reporting Disclosure (ENRD) and firm size, indicating a tendency for larger
firms to exhibit greater levels of environmental reporting compared to their smaller counterparts.
Residual Diagnostic
While the Ordinary Least Squares (OLS) estimator provides Best Linear Unbiased Estimators (BLUE) under the
classical assumptions of the linear regression model, the residuals may exhibit deviations from these
assumptions. These potential violations, including multi-collinearity, non-normality, heteroscedasticity,
autocorrelation, and cross-sectional dependence of the error term, can lead to inefficient estimates, although the
OLS estimates remain consistent. The results of the residual diagnostic tests are presented in the Appendix and
summary of findings presented as follow.
Multi-collinearity Test
To assess potential multi-collinearity among the independent variables, Variance Inflation Factors (VIFs) were
computed for the OLS models (appendix). As outlined by Gujarati and Porter (2009), a common guideline
suggests that VIF values exceeding 10 or tolerance values below 0.10 may indicate strong evidence of multi-
collinearity.
The results of the centred multi-collinearity test, presented in Table 4.6 (excluding the constant term from the
analysis), were examined to identify any potential issues.
Table 4.3: Variance Inflation Factor
VARIABLE
VIF
1/VIF
SORD
1.58
0.634234
ECRD
1.73
0.578576
ENRD
1.27
0.786096
ACE
1.16
0.861131
FSIZE
1.95
0.513166
Mean VIF
1.48
Source: Researcher’s Compilation 2025
Table 4.3 indicates that the VIF values for the majority of variables fall within a range of 1.16 to 1.95, with none
exceeding 2. The mean VIF of 1.48 suggests mild multi-collinearity, as it exceeds 1 but remains below 2. While
these VIF values are greater than 1, they are not sufficiently close to the critical threshold of 10 to indicate severe
multi-collinearity issues.
It is important to note that the analysis in Table 4.3 was conducted under the assumption that the intercept
(constant term) is not a legitimate variable and was therefore excluded from the estimation.
Normality Test
The normality of the residuals was assessed using a combination of visual inspection of histograms and the
Jarque-Bera test. Results indicate that the null hypothesis of normality could not be rejected for the basic OLS
model (appendix) at the 10% significance level. However, for the extended OLS model with corporate
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governance and firm size, the Jarque-Bera test, with p-values of 0.00053 and 0.00515 respectively, led to the
rejection of normality at the 1% significance level.
Serial Autocorrelation
To investigate the presence of serial autocorrelation, both the Wooldridge autocorrelation test and the Breusch-
Godfrey Lagrange Multiplier (LM) test were conducted for all three models. The results consistently indicated
significant first-order autocorrelation (AR (1)) in the residuals. The null hypothesis of no first-order
autocorrelation was rejected at the 1% significance level for all models.
Heteroscedasticity
The presence of heteroscedasticity was assessed using the likelihood ratio (LR) test. For the three OLS model
estimated (appendix), the LR test statistics were 127.19, 145.90, and 133.68, respectively, with corresponding
degrees of freedom of 16.18, 20.16, and 28.69. These results led to the rejection of the null hypothesis of
homoscedasticity at the 1% significance level, indicating the presence of heteroscedasticity across firms or
periods.
Cross-Sectional Dependence
Three tests were employed to assess cross-sectional dependence: Breusch-Pagan LM, Pesaran Scale LM, and
Pesaran CD. For the models in the basic OLS model and the one extended with corporate governance variable
and firm size, the test results did not provide sufficient evidence to reject the null hypothesis of no cross-sectional
dependence at the conventional 10% significance level.
However, for the extended OLS model involving on corporate governance variable, the Breusch-Pagan LM,
Pesaran Scale LM, and Pesaran CD test statistics (66.35, 6.997, and 3.81, respectively) indicated significant
cross-sectional dependence at the 10% significance level.
Hausman Specification Test
In panel data analysis, the choice between fixed effects (FE) and random effects (RE) models is crucial. The
Hausman test examines the correlation between individual effects and regressors, with the null hypothesis being
no correlation (random effects) and the alternative hypothesis being correlation (fixed effects).
For the basic OLS results, the one-way Hausman test, assuming strong individual firm effects and weak period
effects, rejected the null hypothesis of random effects at the 5% significance level (chi-square value of 12.84, p-
value of 0.0050). This suggests that the fixed effects (FE) estimator might be more appropriate. However, given
the relatively small sample size (n = 7) compared to the time dimension (t = 15), the FE estimator may not be
consistent. Therefore, the Feasible Generalized Least Squares (FGLS) estimator was employed as an alternative,
addressing potential inconsistency issues while maintaining efficiency.
For the extended model with corporate governance moderating effects, the initial Hausman test resulted in a
positive definite matrix, likely due to finite sample properties. Following Hauser (2019), a restricted Hausman
test was performed after removing the interaction terms. This restricted test failed to reject the null hypothesis
of random effects at the 5% significance level (chi-square value of 9.33, p-value of 0.0533). Therefore, the RE
model was deemed appropriate for this model. However, due to the potential inconsistency of the RE model in
small N and large T scenarios, the FGLS estimator was used.
For the extended OLS model moderating for corporate governance variable and controlling for firm size effects,
similar issues with the Hausman test were encountered. A reduced version of the Hausman test failed to reject
the null hypothesis at the 10% significance level (chi-square value of 5.198, p-value of 0.3923). Thus, the RE
model was supported. However, given the potential inconsistency of the RE model in small N and large T
scenarios, the FGLS estimator was employed.
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Empirical Analysis
The panel OLS regression was re-estimated using the Feasible Generalized Least Squares (FGLS) method. The
results of this analysis are presented in Table 4.4.
Table 4.4 FGLS Estimates
Dependent Variable: LogTQ
Variable
Coef.
Std. err.
z
P>z
SORD
0.0934
0.0621
1.5000
0.1320
ECRD
-0.1480
0.0476
-3.1100
0.0020
ENRD
0.1323
0.0407
3.2500
0.0010
C
3.2211
0.0614
52.4600
0.0000
Fit Statistics
Wald Chi2
16.67
Prob>Chi2
0.0008
Source: Researcher’s Compilation 2025
Table 4.4 presents the findings of a model investigating the direct relationship between sustainability reporting
disclosures and firm value in listed Nigerian oil and gas companies.
The Wald chi-square statistic of 16.67 (p-value = 0.0008) provides strong evidence that the model coefficients
are jointly statistically different from zero at the 1% significance level, indicating a good overall model fit.
Table 4.5 below, presents the findings of the Feasible Generalized Least Squares (FGLS) regression analysis.
Table 4.5: Feasible GLS Estimate
Dependent Variable: LogTQ
Variable
Coef.
Std. err.
z
P>z
SORD
-2.054
0.563
-3.650
0.000
ACE
0.008
0.127
0.060
0.953
SORD*ACE
0.354
0.140
2.530
0.012
ECRD
1.722
0.272
6.340
0.000
ECRD*ACE
-0.323
0.073
-4.410
0.000
ENRD
0.784
0.433
1.810
0.070
ENRD*ACE
-0.091
0.108
-0.840
0.400
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_cons
2.635
0.523
5.040
0.000
Fit Statistics
Wald Chi2
31.88
DF
7
Prob>Chi2
0.0000
Source: Researcher’s Compilation 2025
The results indicate that Audit Committee Effectiveness (ACE) significantly moderates the positive relationship
between social reporting disclosure and firm value at the 5% significance level (p-value = 0.012). A simultaneous
1% increase in both ACE and social reporting disclosure is associated with a 0.35% increase in firm value.
Conversely, a 1% increase in social reporting disclosure in the absence of effective audit committees is
significantly associated with a 2.05% decrease in firm value at the 1% significance level (p-value = 0.000).
ACE significantly moderates the relationship between economic reporting disclosure and firm value negatively
at the 1% significance level (p-value = 0.000). A simultaneous 1% increase in both ACE and economic reporting
disclosure is significantly associated with a 0.32% decrease in firm value. In contrast, a 1% increase in economic
reporting disclosure in the absence of effective audit committees is associated with a 1.72% increase in firm
value at the 1% significance level (p-value = 0.000).
The moderating effect of ACE on the relationship between environmental reporting disclosure and firm value is
weak and statistically insignificant at the 10% significance level (p-value = 0.364). A simultaneous 1% increase
in both environmental reporting disclosure and ACE is associated with a negligible -0.09% decrease in firm
value at the 10% significance level (p-value = 0.400). In the absence of effective audit committees, a 1% increase
in environmental reporting disclosure is associated with a moderate 0.78% increase in firm value at the 10%
significance level (p-value = 0.070).
The Wald chi-square statistic of 31.88 provides strong evidence for the overall fit of the moderating effect model
at the 0.1% significance level (p-value = 0.0000).
Table 4.6 examines the sensitivity of the results presented in Table 4.5 to the inclusion of firm size as a control
variable.
Table 4.6: Feasible GLS Estimate
Dependent Variable: LogTQ
Variable
Coef.
Std. err.
z
P>z
SORD
-2.247
0.591
-3.800
0.000
ACE
0.013
0.130
0.100
0.918
SORD*ACE
0.381
0.147
2.590
0.010
ECRD
1.887
0.296
6.380
0.000
ECRD*ACE
-0.356
0.078
-4.550
0.000
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ENRD
0.903
0.451
2.000
0.045
ENRD*ACE
-0.112
0.111
-1.010
0.312
FSIZE
0.092
0.125
0.740
0.462
_cons
1.909
1.089
1.750
0.080
Fit Statistics
Wald Chi2
38.32
DF
8
Prob>Chi2
0.0000
Source: Researcher’s Compilation 2025
Table 4.6 indicates that the moderating effect of corporate governance on the relationship between sustainability
reporting and firm value is not significantly influenced by firm size (p-value = 0.462). Specifically, a 1% increase
in firm size is associated with an insignificant 0.092% increase in firm value at a significance level exceeding
10%.
Furthermore, Table 4.6 suggests that the relationship between sustainability reporting and firm value may be
relatively insensitive to firm size, as firm value itself may not be strongly dependent on the absolute size of the
firm.
Robustness Test
A robustness test was conducted using the actual Tobin’s Q measure of firm value instead of the natural
logarithm of the Tobin’s Q. The empirical result above utilized the natural logarithm of raw Tobin's Q for scale
uniformity. Table 4.10 presents the results obtained when using raw Tobin's Q data compared with when using
its natural logarithm.
Table 4.7: Feasible GLS Estimate
Dependent Variable: LogTQ
Dependent Variable: TQ
Variable
Coef.
Std. err.
P>z
Coef
Std. err.
P>z
SORD
-2.2475
0.5909
0.0000
-1107.06
1155.625
0.3380
ACE
0.0135
0.1302
0.9180
198.9314
251.175
0.4280
SORD*ACE
0.3812
0.1472
0.0100
133.5049
300.996
0.6570
ECRD
1.8872
0.2959
0.0000
2268.437
867.926
0.0090
ECRD*ACE
-0.3557
0.0782
0.0000
-382.809
202.203
0.0580
ENRD
0.9034
0.4506
0.0450
3094.93
1591.557
0.0520
ENRD*ACE
-0.1120
0.1107
0.3120
-627.83
397.020
0.1140
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FSIZE
0.0921
0.1252
0.4620
-277.473
145.586
0.0570
_cons
1.9091
1.0890
0.0800
2404.915
1352.153
0.0750
Fit Statistics
Fit Statistics
Wald Chi2
38.32
Wald Chi2
24.39
DF
8
DF
8
Prob>Chi2
0.0000
Prob>Chi2
0.0020
Source: Researcher’s Compilation 2025
Table 4.7 demonstrates that, with the exception of the impact of firm size (which exhibits a negative relationship
when using raw Tobin's Q), the sensitivity of the results to the measurement of Tobin's Q is minimal across the
other predictor variables.
However, Table 4.7 also reveals a potential issue: the use of raw Tobin's Q may lead to inflated coefficient
estimates and increased standard errors.
DISCUSSION OF FINDINGS
The study hypothesized that environmental reporting disclosure does not significantly affect firm value.
However, the results demonstrated a strong positive and statistically significant relationship (p-value = 0.0020)
between environmental reporting and firm value at the 1% significance level, leading to the rejection of the null
hypothesis. This indicates that increased environmental reporting disclosure is positively associated with higher
firm value. The findings suggest that a 1% increase in environmental reporting disclosure is associated with a
13% increase in firm value, and vice versa. This strong positive relationship can be attributed to factors such as
increased investor confidence resulting from transparent communication of environmental investments and
corporate social responsibility initiatives. These findings align with the research of Mohamed & Faouzi (2014),
Aondoakaa (2015), Chang (2015), Plumlee et al. (2015), Raymond et al. (2016), Tarmuji et al. (2016), Joseph et
al. (2017), Li et al. (2017), and Nnamani et al. (2017), while contradicting the findings of Talebnia et al. (2013),
Qiu et al. (2014), Utami (2015), Ratri et al. (2017), and Ratanacharoenchai et al. (2017).
Similarly, the study hypothesized that economic reporting disclosure does not significantly affect firm value.
However, the results revealed a strong inverse and statistically significant relationship (p-value = 0.0010)
between economic reporting disclosure and firm value at the 1% significance level, leading to the rejection of
the null hypothesis. This indicates that increased economic reporting disclosure is negatively associated with
firm value. The findings suggest that a 1% increase in economic reporting disclosure is associated with an
approximate 15% decrease in firm value, and vice versa. This negative relationship may be attributed to the
extensive reporting requirements mandated by the adopted GRI G4 reporting guidelines, potentially leading to
increased compliance costs and reduced flexibility for firms. These findings are consistent with the research of
Utami (2015) and Kuzey et al. (2017), while contradicting the findings of Stacchezzini et al. (2016) and
Ratanacharoenchai et al. (2017).
The study hypothesized that social reporting disclosure does not significantly affect firm value. The results
showed a weak positive relationship between social reporting disclosure and firm value, although this
relationship was not statistically significant at conventional levels (p-value = 0.1320). Therefore, the null
hypothesis could not be rejected. These findings are consistent with the research of Fatemi et al. (2016), Kwanbo
(2011), Carnevale et al. (2012), Talebnia et al. (2013), and Ratanacharoenchai et al. (2017), while contradicting
the findings of Li et al. (2017), Tarmuji et al. (2016), Abiodun (2012), and Qiu et al. (2014).
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Furthermore, the study examined the moderating effect of Audit Committee Effectiveness (ACE) on the
relationship between environmental, social, and economic reporting disclosure and firm value. The results
indicated that ACE did not significantly moderate the relationship between environmental reporting disclosure
and firm value, even though environmental reporting alone appear to moderately impact firm value positively
by 0.078 (p-value = 0.070). Meanwhile, ACE is shown in this research to significantly moderate the relationship
between economic reporting disclosure and firm value negatively at the 1% significance level (p-value = 0.000)
negatively by 0.032, because in its absence economic reporting disclosure increase firm value by 1.72 at the 1%
significance level (p-value = 0.000). In addition, the research found that ACE significantly moderated the
relationship between social reporting disclosure and firm value positively by 0.35 at the 5% significance level
(p-value = 0.012), even though social reporting alone appears to significantly reduce firm value by 2.05 at the
1% significance level (p-value = 0.000).
Overall Findings and Implications
The study's findings demonstrate that while ACE did not significantly moderate the relationship between
environmental reporting and firm value, it significantly moderated the relationships between economic and social
reporting disclosures and firm value. These findings partially support agency theory, suggesting that effective
audit committees play a crucial role in enhancing the positive impact of sustainability reporting on firm value,
particularly in the context of economic and social reporting. These findings support the findings of Novitasari
and Puspawati (2022), but contradict the findings of Fuadah et al. (2022) and Iskandar et al. (2023).
Finally, the finding of the research shows that firm size did not significantly influence the moderating effects of
corporate governance on the relationship between sustainability reporting and firm value at 10% significance
level (p-value = 0.462). This implies that the moderating effect of corporate governance mechanism and the
direct relationship between sustainability reporting and firm value does not vary according to the firm size. This
is line with findings of Iskandar et al. (2023). However, contradict the findings of Fuadah et al. (2022). Thus,
firm value may not exhibit a strong direct correlation with the absolute size of the firm within the context of this
study.
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary of Findings
The study demonstrates that among sustainability reporting components, environmental reporting disclosure
exerts a significant positive effect on firm value, suggesting that higher levels of environmental transparency
are associated with increased market valuation for Nigerian oil and gas companies. Conversely, economic
reporting disclosure displays a significant negative effect on firm value, indicating that increased economic
disclosure may be perceived unfavourably by the market, potentially because of elevated compliance costs
or diminished managerial flexibility. In contrast, social reporting disclosure shows no statistically significant
impact on firm value within the scope of this research.
The effectiveness of the audit committee significantly moderates the relationship between both social and
economic reporting disclosures and firm value. Specifically, ACE enhances the positive effect of social
reporting disclosure on firm value, indicating the importance of effective audit oversight in realizing value
from social responsibility activities. In contrast, ACE moderates the relationship between economic reporting
disclosure and firm value negatively, which may reflect stricter committee oversight amplifying the
constraints or costs associated with extensive economic reporting. However, ACE does not have a significant
moderating effect on the relationship between environmental disclosure and firm value.
The analysis finds that firm size does not significantly alter the moderating effects of corporate governance
or the direct relationship between sustainability reporting and firm value. This indicates that, within the
sample, the value relevance of sustainability reporting and governance mechanisms is relatively insensitive
to differences in firm size.
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Conclusions
The findings of this study reveal that environmental reporting disclosure (ENRD) exerts a positive and
significant influence on firm value, as proxied by Tobin's Q. Conversely, economic reporting disclosure (ECRD)
demonstrates a strong inverse significant influence on firm value. Social reporting disclosure (SORD), however,
was found to be statistically insignificant. These results collectively suggest that investors incorporate
sustainability aspects into their investment decision-making processes, aligning with stakeholder theory, which
posits that companies can enhance investor value through effective sustainability reporting.
Furthermore, the study examined the moderating role of Audit Committee Effectiveness (ACE). While ACE did
not significantly moderate the relationship between environmental reporting and firm value, it significantly
moderated the relationships between economic and social reporting disclosures and firm value. This finding
supports the notion that effective audit committees play a crucial role in monitoring sustainability performance,
as stipulated by agency theory.
Finally, the analysis suggests that firm size does not significantly moderate the relationship between
sustainability reporting and firm value. This implies that firm value may not exhibit a strong direct correlation
with the absolute size of the firm within the context of this study.
Recommendations
Based on the study's findings, several recommendations are offered;
Firstly, oil and gas companies in Nigeria should be encouraged to enhance and incentivize comprehensive
sustainability reporting, with a particular emphasis on environmental and social dimensions.
Secondly, prioritizing environmental sustainability initiatives and effectively communicating environmental
performance to stakeholders is crucial.
Thirdly, strengthening social responsibility programs that align with community needs and expectations is
recommended.
Finally, oil and gas companies should continuously strive to enhance the effectiveness of their audit committees
to improve overall corporate governance.
Limitations of the Study
This research employed a secondary data approach, utilizing financial statements and annual reports from
selected listed oil and gas companies on the Nigerian Exchange Group. While this approach offers valuable
insights, it is important to acknowledge the potential limitations associated with secondary data.
Suggestions for Future Research
To further deepen our understanding of the intricate relationship between sustainability reporting, corporate
governance, and firm value within the oil and gas sector, future research could explore several avenues.
Conducting longitudinal studies across various industries would enable researchers to observe changes in
sustainability reporting, corporate governance, and firm value over time, facilitating comparative analysis and
more robust insights into causal relationships.
Furthermore, complementing quantitative analysis with qualitative methodologies, such as questionnaires,
interviews, and case studies, can provide valuable contextual insights and managerial perspectives, offering a
richer understanding of the phenomena under investigation.
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