Assessing the Impact of ESG Disclosures on the Market Valuation of Listed Service Companies in Nigeria

Abstract

The rising global emphasis on sustainability has transformed corporate reporting practices, with increasing recognition that non-financial disclosures—particularly in the areas of environmental, social, economic, and governance (ESG) performance—can significantly influence firm valuation. This study examines the effect of sustainability reporting on the firm value of listed service companies in Nigeria, a sector that contributes significantly to national GDP and is sensitive to stakeholder perceptions. Despite the issuance of the Nigerian Exchange Group’s (NGX) Sustainability Disclosure Guidelines in 2019, compliance and reporting quality remain low and inconsistent among Nigerian service firms. Using a panel data approach, the study analyzes secondary data from the financial reports of selected listed service companies covering the period from 2014 to 2023. Firm value was peroxide by Tobin’s Q, while sustainability reporting was decomposed into four dimensions: environmental, social, economic, and governance disclosures. Multiple regression analysis was employed to test four null hypotheses. The findings reveal that environmental and governance disclosures have a statistically significant positive effect on firm value, while social and economic disclosures show no significant impact. These results suggest that investors in Nigeria’s service sector place greater value on firms’ environmental responsibility and governance practices than on other ESG dimensions. The study recommends that regulatory bodies intensify efforts to enforce sustainability reporting standards and that firms adopt more robust and transparent ESG disclosure practices to enhance their market valuation and long-term competitiveness.