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The Moderating Effect of Profitability on the Relationship between Sustainability Reporting and Value of Environmentally Sensitive Firms in Nigeria

Ali Alhaji Isa, Ishaq Alhaji Samaila PhD,FCA, ACS and Mohammed Sabo Bello

Abstract

This study examined the moderating effect of profitability on the relationship between sustainability reporting and firm value. The dataset encompasses 60 environmentally sensitive companies listed on the Nigerian Exchange Group (NGX), the study employed census sampling technique utilizing panel data over a five-year span from 2018 to 2022, the data were analyzed using multiple regression analyses with help of STATA software version 14. The results revealed that sustainability reporting has a positive and significant effect on firm value. Conversely, profitability shows a positive and significant effect on firm value. Also, the result revealed that profitability has positive and significant moderating effect on the relationship between sustainability reporting and the value of environmentally sensitive firms in Nigeria. The study concludes that high level of profitability tends to strengthen the relationship between sustainability reporting and value of listed environmentally sensitive firms in Nigeria. The study recommends that, listed environmentally sensitive firms in Nigeria should improve their sustainability reporting compliance and prioritize it relevance and quality, aligning it with stakeholder interest, integrating it into core business strategy, and implementing continuous monitoring and feedback mechanisms. Although, initial gains might be limited, there is a possibility of long-term benefits.

Keywords

Environmentally Sensitive Firms; Firm value; Profitability; Sustainability reporting;

References

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