ENVIRONMENTAL REPORTING AND MARKET VALUE OF LISTED NON-FINANCIAL FIRMS IN NIGERIA

Abstract
The study investigates the relationship between environmental reporting and market value of listed non-financial firms in Nigeria. Secondary data gathered from the annual reports of the sample of fifty (50), out of the population of one hundred and twenty-eight (128) listed non-financial firms, selected through purposive sampling techniques, were analysed using content and multiple regression analyses. The study finds that there is a significant positive relationship between environmental reporting and firm market value. It is recommended that listed non-financial firms should consciously make positive contributions to their operating environment in the areas of employee health and benefit cost, community social responsibility cost, and environmental research and development as they report the same in their annual environmental reporting for the purpose of enhancing their market values.
Keywords: Environmental Reporting, Environmental degradation, Firm Market Value, Firm value drives
Introduction
Environmental reporting is regarded as disclosure of an entity’s environmental related information concerning environmental risks, costs, liabilities, policies, targets, strategies, or environmental performance to stakeholders that are interested in the information for making economic decisions relating to the entity. Environmental reporting is used interchangeably as environmental accounting. It can also be regarded as an environmental management strategy to communicate with those who have an interest in such information (Deegan, 2002).
Meanwhile, firm value is the worth of a company in financial term. It is the price that an informed and willing buyer would be ready to pay in an arm length transaction. Market value is one of the indicators of measuring performance of corporate managers. It is attained through value addition to corporate shareholders. Value creation is crucial to business sustainability, value-based studies assess the relationship between the share price of firms and the financial information they report (Qiu et al., 2016). It is deduced here that the significant the relationship, the more useful the financial figures released by companies are to the investors’ who are important group of users of financial reporting information. This normally focuses on the net income and book value of shareholder’s fund as they are important drivers in company valuation (Feltham & Ohlson, 1995; Ohlson, 1999, 2000). The potential of environmental value creation stems from the significance of intangibles in the equity holder value model. The intangibles include intellectual, human, social, and natural capital of a company which add value but are not conventionally reported in the Statement of Financial Position. The objectivity of the accounting process matters a lot in respect of the value that can be realized.
Environmental matters are increasingly dominating intellectual and policy deliberations debates because it is no longer news that the chemical, biological, and physical integrity of the planet is being compromised daily through air pollution, destruction of the ozone layer through the release of chlorofluorocarbons, global warming produced by greenhouse gases and, threats to biodiversity especially deforestation of tropical rainforests. These all occur on specific national territories, but they are gradually depleting ‘common heritage of humanity. Therefore, the productive activities of the firms should not be averse to their operational environments.