VALUE RELEVANCE OF ENVIRONMENTAL SUSTAINABILITY INFORMATION DISCLOSURE: EVIDENCE FROM LISTED OIL & GAS FIRMS IN NIGERIA
Keywords:
Carbon Disclosure, Carbon Emission, Firm Value. Olhson Valuation Model.
Abstract
The aim of this study is to empirically investigate the value relevance of environmental sustainability information disclosure of listed oil and gas firms in Nigeria using a fifteen (15) year time frame data (2006 to 2020). Ohlson 1995 Valuation Model with carbon emission information disclosure as the non-financial were included in the model. We hypothesized that carbon emission information disclosure has no significant relevant value among listed oil and gas companies in Nigeria during the period under investigation. We employed ex-post facto and descriptive research design on a panel data set sourced from annual financial reports of listed oil and gas firms in Nigeria. Robust least square regression analysis technique was employed to test the formulated hypotheses. Results obtained reflects a poor carbon emission reporting situation in Nigeria. It reveals that on average about 2% of the sampled firms disclosed information relating to carbon emission during the period under consideration. Specifically, the regression result indicates that stock market investors reactions towards carbon emission disclosure of oil and gas firms in Nigeria is negative which further strengthen the notion that investors perceive the control of carbon emission as severe cost rather than profit. The study recommends that to relieve such negative consequences in the capital market, managers of oil and gas firms in Nigeria must take appropriate action to communicate their commitments and efforts genuinely and adequately around carbon reduction to investors. This study contributes to the emerging field of environmental sustainability accounting especially from an underdeveloped market such as Nigeria.
PAPER CLASSIFICATION: Research paper
References
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Al-Tuwaijri, S. A., T. E. Christensen and K. E. Hughes II (2004), ‘The Relations Among Environmental Disclosure, Environmental Performance and Economic Performance: A Simultaneous Equations Approach’, Accounting, Organizations, and Society, 29(5), 447–71.
Asaolu, T., Agboola, A., Ayoola, T., & Salawu, M. (2011). Sustainability reporting in the Nigerian oil and gas sector. Paper presented at the Proceedings of the Environmental Management Conference, Federal University of Agriculture, Abeokuta, Nigeria.
Barth, M. E., Beaver, W. H. & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: Another view. Journal of Accounting and Economics 31 (1-3): 77–104.
Batson, C. D. (1987). “Prosocial motivation: is it ever truly altruistic,” in Advances in Experimental Social Psychology, ed L. Berkowitz (San Diego, CA Academic Press), 65–122
Batson, C. D. (2011). Altruism in Humans. New York, NY: Oxford University Press.
Böhling, K., Murguía, D.I., Godfrid, J., (2019). Sustainability reporting in the mining sector: Exploring its symbolic nature. Bus. Soc. 58 (1), 191–225.
Chapple, L., Clarkson, P. M. & Gold, D. L. (2013). The Cost of Carbon: Capital Market Effects of the Proposed Emission Trading Scheme (ETS). Abacus 49: 1–33.
Choi, B., Luo, L. & Shrestha, P. (2021) The value relevance of carbon emissions from Australian-listed companies. Australian Journal of Management, 46(1): 3-23.
Choi, B., Luo, L.e., (2021). Does the market value greenhouse gas emissions? Evidence from multi-country firm data. The British Accounting Review. 53 (1), 1– 24.
Choi, B., Luo, L.e., Shrestha, P., (2021). The value relevance of carbon emissions information from Australian-listed companies. Australian Journal of Management. 46 (1), 3–23.
Clarkson, P. M., Fang, X., Li. Y., & Richardson, G. D. (2013). The relevance of environmental disclosures.: Are such disclosures incrementally informative: Journal of Accounting and Public Policy, 32(5): 410-431.
Clarkson, P. M., Li. Y., Pinnucck, M. & Richardson, G. D. (2015). The valuation relevance of greenhouse gas emissions under the European Union carbon emissions trading scheme. European Accounting Review, 24(3): 551-580.
Clarkson, P. M., Li. Y., Richardson, G. D. & Vasvari, F. P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organization and Society, 33(4-5): 303-327.
Clarkson, P., Grewal, J. & Richardson, G. (2022). The equity value relevance of carbon emissions. Forthcoming in Handbook of Business and Climate Change.
Clarkson, P.M., Li, Y., Pinnuck, M., Richardson, G.D., (2015). The valuation relevance of greenhouse gas emissions under the European Union carbon emissions trading scheme. European Accounting Review. 24 (3), 551–580.
Cooper, S.A., Raman, K.K., Yin, J., (2018). Halo effect or fallen angel effect? Firm value consequences of greenhouse gas emissions and reputation for corporate social responsibility. Journal of Accounting and Public Policy 37 (3), 226–240.
Cormier, D. & Magnan, M. (2007). The revisited contribution of environmental reporting to investors' valuation of a firm's earnings: An international perspective. Ecological economics, 62(3): 613-626.
Cormier, D., Magnan, M. & Morard, B. (1993). The impact of corporate pollution on market valuation: Some empirical evidence. Ecological Economics 8(2): 135–155.
Du, X., (2015a). How the market values greenwashing? Evidence from China. Journal of Business Ethics 128 (3), 547–574
Echobu, J., Ekundayo, O. O. & Abu, S. O. (2022). Value relevance of sustainability reporting in the oil and gas sector in Nigeria. International Journal of Accounting Research, 7(1):36-42.
Eckel, C. C., and Grossman, P. J. (1996). Altruism in anonymous dictator games. Games Economic Behaviour 16, 181–191.
Elijido-Ten, E. O. & Clarkson, P. (2019) Going beyond climate change risk management: Insights from the world’s largest most sustainable corporations. Journal of Business Ethics. 157(40): 1067-1089.
Emeka-Nwokeji, N. A. & Okeke, P. C. (2019). Evaluating Corporate Environmental Disclosures and Performance of Quoted Non-Financial Firms in Nigeria. Journal of Accounting, Business, and Social Sciences, 1(2), 119-132.
Freedman, M. & Jaggi, B. (1982). Pollution disclosures, pollution performance 465 and economic performance. Omega 10 (2): 167–176.
Freedman, M., & Patten, D. M. (2004). Evidence on the pernicious effect of financial report environmental disclosure. Accounting Forum, 28(1), 27-41.
García-Sánchez, I.-M., Hussain, N., Khan, S.-A., Martínez-Ferrero, J., (2021). Do markets punish or reward corporate social responsibility decoupling? Journal of Business Society 60 (6), 1431–1467
Giannarakis, G., Zafeiriou, E., Sariannidis, N., (2017). The impact of carbon performance on climate change disclosure. Business Strategy and the Environment 26 (8), 1078–1094.
Global Reporting Initiative. (2002). Sustainability reporting guidelines. Amsterdam: Deutsche Ubersetzung.
Griffin, P., Lont, D., & Sun, E. (2017). The relevance to investors of greenhouse gas emission disclosures. Contemporary Accounting Research, 34(2), 1265-1297.
Hardiyansah, M., Agustini, A. T. & Purnamawati, I. (2021). The effect of carbon emission disclosure on firm value: Environmental performance and industrial type. The Journal of Asian Finance, Economics, and Business, 8(1): 123-133.
Hart, S. L. (1997). Beyond greening: Strategies for a sustainable world. Harvard Business Review, 75(1), 66-76. He, Y., Tang, Q. & Wang, K. (2016). Carbon performance versus financial performance. China Journal of Accounting Studies, 4(4): 357-378.
Healy, P. M. & Palepu. K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics 31: 405–440.
Herbert, W. E., Nwaorgu, I. A., Onyilo, F. & Iormbagah, J. A. (2020). Sustainability reporting and performance of listed upstream oil and gas firms in Nigeria: A content evaluation approach. International Journal of Applied Economics, Finance and Accounting, 8(1):46-61.
Holm, C., & Rikhardsson, P. (2008). Experienced and novice investors: does environmental information influence investment allocation decisions? European Accounting Review, 17(3), 537-557.
Jiang, Y., Luo, L., Xu, J. & Shao, X. (2021). The value relevance of corporate voluntary carbon disclosure: Evidence from the United States and BRIC countries. Journal of Contemporary Accounting and Economics, 17, 1-22.
Johnson, R. C., Danko, G. P., Darvill, T. J., Bochner, S., Bowers, J. K., Huang, Y.- H., et al. (1989). Cross-cultural assessment of altruism and its correlates. Persons with Individual Difference 10, 855–868
Jung, J., Herbohn, K., Clarkson, P., (2018). Carbon risk, carbon risk awareness and the cost of debt financing. Journal of Business Ethics 150 (4), 1151–1171.
Kanodia, C., & Sapra, H. (2016). A real effects perspective to accounting measurement and disclosure: Implications and insights for future research. Journal of Accounting Research 54(2): 623-676.
Khaghaany, M., Kbelah, S., & Almagtome, A. (2019). Value relevance of sustainability reporting under an accounting information system: Evidence from the tourism industry. African Journal of Hospitality, Tourism and Leisure, 8(Special Edition CUT), 1-12. Laskar, T. (2020). What lies behind the formation of corporate social responsibility activities in the automotive industry: A study on the disclosure practices at Volvo cars. A Dissertation leading to the award of Master Program me in Industrial Management and Innovation. UPSALA UNIVERSITET.
Li, Y., Gong, M., Zhang, X. Y. & Koh, L. (2017). The impact of environmental, social and governance disclosure on firm value. The role of CEO power. The British Accounting Review
Li, S. (2016). Altruism, social preferences and environment collaboration governance. Journal of Jishou University 37, 81–88.
Luo, L. and Tang, Q. (2014) Does voluntary carbon disclosure reflect underlying carbon performance? Journal of Contemporary Accounting & Economics 10: 191–20.
Matsumura, E., Prakash, R., & Vera-Munoz, S. (2014). Firm-value effects of carbon emissions and carbon disclosures. The Accounting Review, 89(2), 695-724.
Milgrom, P. R. (1981), ‘Good News and Bad News: Representation Theorems and Applications’, Bell Journal of Economics, 12(2): 380–91.
Okpala, O. P., & Iredele, O. O. (2018). Corporate social and environmental disclosures and market value of listed firms in Nigeria. Copernican Journal of Finance & Accounting, 7(3), 9-28.
Onyebuenyi, F. E. (2021). Corporate environmental sustainability disclosures and financial performances: a cross country analyses. UNIBEN Journal of Accounting, 5(1):67-80.
Oyedokun, G, E., Egberioyinemi, E. & Tonademukaila, A. (2019) Environmental accounting disclosure and firm value of industrial goods companies in Nigeria. IOSR Journal of Economics and Finance, 10 (1): 7-27.
Plumlee, M., Brown, D., Hayes, R. M. & Marshall, R. S. (2015). Voluntary environmental disclosure quality and firm value: Further evidence. Journal of Accounting and Public Policy 34 (4): 336–361.
S`ımnett, R., Vanstraelen, A. & Chua, W. F. (2009). Assurance on sustainability 501 reports: An international comparison. Accounting Review 84 (3): 937–967.
Schieman, F. & Sakhel, S. (2019) Carbon disclosure, contextual factors and information asymmetry. The case of physical risk reporting. European Accounting Review, 28(4):791-818.
Sihotang, P., & Effendi, S. (2010). Sustainability reporting for CSR disclosures: A case study in oil and gas industry.
Sun, Z., Wang, S. & Li, D. (2022). Carbon Emission, Voluntary Carbon Disclosure and Firm Value. Research Square, 1-16.
Umoren, A., Akpan, M., & Okafor, L. (2018). Oil companies’ performance and environmental accounting reporting in Nigeria. Asian Journal of Economics, Business and Accounting, 8(1), 1-8.
Uwakonye, M., Osho, G., & Anucha, H. (2006). The impact of oil and gas production on the Nigerian economy: A rural sector economic model. International Business and Economics Research Journal, 5(2), 61-75.
Verrecchia, R. E. (1983). Discretionary disclosure. Journal of Accounting and Economics. 5, 179-194.
Al-Tuwaijri, S. A., T. E. Christensen and K. E. Hughes II (2004), ‘The Relations Among Environmental Disclosure, Environmental Performance and Economic Performance: A Simultaneous Equations Approach’, Accounting, Organizations, and Society, 29(5), 447–71.
Asaolu, T., Agboola, A., Ayoola, T., & Salawu, M. (2011). Sustainability reporting in the Nigerian oil and gas sector. Paper presented at the Proceedings of the Environmental Management Conference, Federal University of Agriculture, Abeokuta, Nigeria.
Barth, M. E., Beaver, W. H. & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: Another view. Journal of Accounting and Economics 31 (1-3): 77–104.
Batson, C. D. (1987). “Prosocial motivation: is it ever truly altruistic,” in Advances in Experimental Social Psychology, ed L. Berkowitz (San Diego, CA Academic Press), 65–122
Batson, C. D. (2011). Altruism in Humans. New York, NY: Oxford University Press.
Böhling, K., Murguía, D.I., Godfrid, J., (2019). Sustainability reporting in the mining sector: Exploring its symbolic nature. Bus. Soc. 58 (1), 191–225.
Chapple, L., Clarkson, P. M. & Gold, D. L. (2013). The Cost of Carbon: Capital Market Effects of the Proposed Emission Trading Scheme (ETS). Abacus 49: 1–33.
Choi, B., Luo, L. & Shrestha, P. (2021) The value relevance of carbon emissions from Australian-listed companies. Australian Journal of Management, 46(1): 3-23.
Choi, B., Luo, L.e., (2021). Does the market value greenhouse gas emissions? Evidence from multi-country firm data. The British Accounting Review. 53 (1), 1– 24.
Choi, B., Luo, L.e., Shrestha, P., (2021). The value relevance of carbon emissions information from Australian-listed companies. Australian Journal of Management. 46 (1), 3–23.
Clarkson, P. M., Fang, X., Li. Y., & Richardson, G. D. (2013). The relevance of environmental disclosures.: Are such disclosures incrementally informative: Journal of Accounting and Public Policy, 32(5): 410-431.
Clarkson, P. M., Li. Y., Pinnucck, M. & Richardson, G. D. (2015). The valuation relevance of greenhouse gas emissions under the European Union carbon emissions trading scheme. European Accounting Review, 24(3): 551-580.
Clarkson, P. M., Li. Y., Richardson, G. D. & Vasvari, F. P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organization and Society, 33(4-5): 303-327.
Clarkson, P., Grewal, J. & Richardson, G. (2022). The equity value relevance of carbon emissions. Forthcoming in Handbook of Business and Climate Change.
Clarkson, P.M., Li, Y., Pinnuck, M., Richardson, G.D., (2015). The valuation relevance of greenhouse gas emissions under the European Union carbon emissions trading scheme. European Accounting Review. 24 (3), 551–580.
Cooper, S.A., Raman, K.K., Yin, J., (2018). Halo effect or fallen angel effect? Firm value consequences of greenhouse gas emissions and reputation for corporate social responsibility. Journal of Accounting and Public Policy 37 (3), 226–240.
Cormier, D. & Magnan, M. (2007). The revisited contribution of environmental reporting to investors' valuation of a firm's earnings: An international perspective. Ecological economics, 62(3): 613-626.
Cormier, D., Magnan, M. & Morard, B. (1993). The impact of corporate pollution on market valuation: Some empirical evidence. Ecological Economics 8(2): 135–155.
Du, X., (2015a). How the market values greenwashing? Evidence from China. Journal of Business Ethics 128 (3), 547–574
Echobu, J., Ekundayo, O. O. & Abu, S. O. (2022). Value relevance of sustainability reporting in the oil and gas sector in Nigeria. International Journal of Accounting Research, 7(1):36-42.
Eckel, C. C., and Grossman, P. J. (1996). Altruism in anonymous dictator games. Games Economic Behaviour 16, 181–191.
Elijido-Ten, E. O. & Clarkson, P. (2019) Going beyond climate change risk management: Insights from the world’s largest most sustainable corporations. Journal of Business Ethics. 157(40): 1067-1089.
Emeka-Nwokeji, N. A. & Okeke, P. C. (2019). Evaluating Corporate Environmental Disclosures and Performance of Quoted Non-Financial Firms in Nigeria. Journal of Accounting, Business, and Social Sciences, 1(2), 119-132.
Freedman, M. & Jaggi, B. (1982). Pollution disclosures, pollution performance 465 and economic performance. Omega 10 (2): 167–176.
Freedman, M., & Patten, D. M. (2004). Evidence on the pernicious effect of financial report environmental disclosure. Accounting Forum, 28(1), 27-41.
García-Sánchez, I.-M., Hussain, N., Khan, S.-A., Martínez-Ferrero, J., (2021). Do markets punish or reward corporate social responsibility decoupling? Journal of Business Society 60 (6), 1431–1467
Giannarakis, G., Zafeiriou, E., Sariannidis, N., (2017). The impact of carbon performance on climate change disclosure. Business Strategy and the Environment 26 (8), 1078–1094.
Global Reporting Initiative. (2002). Sustainability reporting guidelines. Amsterdam: Deutsche Ubersetzung.
Griffin, P., Lont, D., & Sun, E. (2017). The relevance to investors of greenhouse gas emission disclosures. Contemporary Accounting Research, 34(2), 1265-1297.
Hardiyansah, M., Agustini, A. T. & Purnamawati, I. (2021). The effect of carbon emission disclosure on firm value: Environmental performance and industrial type. The Journal of Asian Finance, Economics, and Business, 8(1): 123-133.
Hart, S. L. (1997). Beyond greening: Strategies for a sustainable world. Harvard Business Review, 75(1), 66-76. He, Y., Tang, Q. & Wang, K. (2016). Carbon performance versus financial performance. China Journal of Accounting Studies, 4(4): 357-378.
Healy, P. M. & Palepu. K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics 31: 405–440.
Herbert, W. E., Nwaorgu, I. A., Onyilo, F. & Iormbagah, J. A. (2020). Sustainability reporting and performance of listed upstream oil and gas firms in Nigeria: A content evaluation approach. International Journal of Applied Economics, Finance and Accounting, 8(1):46-61.
Holm, C., & Rikhardsson, P. (2008). Experienced and novice investors: does environmental information influence investment allocation decisions? European Accounting Review, 17(3), 537-557.
Jiang, Y., Luo, L., Xu, J. & Shao, X. (2021). The value relevance of corporate voluntary carbon disclosure: Evidence from the United States and BRIC countries. Journal of Contemporary Accounting and Economics, 17, 1-22.
Johnson, R. C., Danko, G. P., Darvill, T. J., Bochner, S., Bowers, J. K., Huang, Y.- H., et al. (1989). Cross-cultural assessment of altruism and its correlates. Persons with Individual Difference 10, 855–868
Jung, J., Herbohn, K., Clarkson, P., (2018). Carbon risk, carbon risk awareness and the cost of debt financing. Journal of Business Ethics 150 (4), 1151–1171.
Kanodia, C., & Sapra, H. (2016). A real effects perspective to accounting measurement and disclosure: Implications and insights for future research. Journal of Accounting Research 54(2): 623-676.
Khaghaany, M., Kbelah, S., & Almagtome, A. (2019). Value relevance of sustainability reporting under an accounting information system: Evidence from the tourism industry. African Journal of Hospitality, Tourism and Leisure, 8(Special Edition CUT), 1-12. Laskar, T. (2020). What lies behind the formation of corporate social responsibility activities in the automotive industry: A study on the disclosure practices at Volvo cars. A Dissertation leading to the award of Master Program me in Industrial Management and Innovation. UPSALA UNIVERSITET.
Li, Y., Gong, M., Zhang, X. Y. & Koh, L. (2017). The impact of environmental, social and governance disclosure on firm value. The role of CEO power. The British Accounting Review
Li, S. (2016). Altruism, social preferences and environment collaboration governance. Journal of Jishou University 37, 81–88.
Luo, L. and Tang, Q. (2014) Does voluntary carbon disclosure reflect underlying carbon performance? Journal of Contemporary Accounting & Economics 10: 191–20.
Matsumura, E., Prakash, R., & Vera-Munoz, S. (2014). Firm-value effects of carbon emissions and carbon disclosures. The Accounting Review, 89(2), 695-724.
Milgrom, P. R. (1981), ‘Good News and Bad News: Representation Theorems and Applications’, Bell Journal of Economics, 12(2): 380–91.
Okpala, O. P., & Iredele, O. O. (2018). Corporate social and environmental disclosures and market value of listed firms in Nigeria. Copernican Journal of Finance & Accounting, 7(3), 9-28.
Onyebuenyi, F. E. (2021). Corporate environmental sustainability disclosures and financial performances: a cross country analyses. UNIBEN Journal of Accounting, 5(1):67-80.
Oyedokun, G, E., Egberioyinemi, E. & Tonademukaila, A. (2019) Environmental accounting disclosure and firm value of industrial goods companies in Nigeria. IOSR Journal of Economics and Finance, 10 (1): 7-27.
Plumlee, M., Brown, D., Hayes, R. M. & Marshall, R. S. (2015). Voluntary environmental disclosure quality and firm value: Further evidence. Journal of Accounting and Public Policy 34 (4): 336–361.
S`ımnett, R., Vanstraelen, A. & Chua, W. F. (2009). Assurance on sustainability 501 reports: An international comparison. Accounting Review 84 (3): 937–967.
Schieman, F. & Sakhel, S. (2019) Carbon disclosure, contextual factors and information asymmetry. The case of physical risk reporting. European Accounting Review, 28(4):791-818.
Sihotang, P., & Effendi, S. (2010). Sustainability reporting for CSR disclosures: A case study in oil and gas industry.
Sun, Z., Wang, S. & Li, D. (2022). Carbon Emission, Voluntary Carbon Disclosure and Firm Value. Research Square, 1-16.
Umoren, A., Akpan, M., & Okafor, L. (2018). Oil companies’ performance and environmental accounting reporting in Nigeria. Asian Journal of Economics, Business and Accounting, 8(1), 1-8.
Uwakonye, M., Osho, G., & Anucha, H. (2006). The impact of oil and gas production on the Nigerian economy: A rural sector economic model. International Business and Economics Research Journal, 5(2), 61-75.
Verrecchia, R. E. (1983). Discretionary disclosure. Journal of Accounting and Economics. 5, 179-194.
Published
2023-07-21
Section
Articles
