EFFECT OF ENVIRONMENTAL AND SOCIAL REPORTING ON MARKET VALUE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract
This study examined the effect of environmental and social reporting on the market value of listed deposit money banks (DMBs) in Nigeria. The research design was ex-post facto, and secondary data were extracted from the annual reports and accounts of 12 sampled DMB listed on the NSE for eight years from 2012–2019. Content analysis was used to extract data for the study. Diagnostic tests such as normality tests, multicollinearity tests, and Hausman specification, among others, were carried out. Radom panel regression analysis was used to analyse the data. The result showed that environmental reporting has a negative effect on the market value of DMBs in Nigeria as a proxy by Tobin’s Q and stock returns. Social reporting has a positive effect on market value proxy by Tobin’s Q while it has a negative effect on stock returns; the interaction between environmental and social reporting has a negative effect on Tobin’s Q and a positive effect on the stock returns of DMBs in Nigeria. The study concluded that reporting in the banking industry improved the wealth of stakeholders and society at large. The study, therefore, recommended, among other things, that banks should invest in socially responsible activities as sustainable businesses are those that can ensure their future.
Keywords: Environmental reporting, Social reporting, Tobin’s Q, Stock returns, Market value
Introduction
Every business organization needs a conducive atmosphere to operate successfully. To compete effectively, a company requires a healthy, educated workforce, long-term resources, and a capable government. For a conducive and friendly business atmosphere, corporations usually participate in some environmental and social activities within their domain. These aspects of a company’s operation are nowadays captured as part of sustainability reporting. That is a reporting system that covers the environmental, social, and economic performance of a company.
The environmental aspects of sustainability reporting deal with issues such as materials, energy, water, pollution, carbon dioxide, biodiversity, environmental management systems, waste management, and recycling, amongst other environmental activities of the organization (Aondoakaa & Kwanum, 2020). The impact of an organization on the social systems in which it operates is the focus of social reporting. In general, social reporting means that businesses consider the interests of a wide range of stakeholders (both internal and external to the organization) and incorporate social justice principles into their operations (Alkababji, 2014).
The difficulty facing today’s managers is determining how to manage performance across the dimensions of social and environmental sustainability to reap the benefits of the strategy’s implementation. This follows a response to the demand for companies to be more transparent in how they treat their social and environmental activities as they affect their stakeholders. Prior studies on environmental and social reporting have focused mainly on developed countries, with sparse work done on measuring the impact of these aspects of sustainability reporting on performance in developing countries like Nigeria.