ESG Reporting and Firm Value in Nigeria: Does Institutional Ownership Matter?

Abstract

As global reporting practices evolve beyond traditional financial metrics to incorporate Environmental, Social, and Governance (ESG) dimensions, understanding their valuation impact is imperative. This study examines the moderating influence of institutional ownership on the sustainability reporting–firm value nexus among Nigerian listed companies. Analyzing secondary data from 120 firms across 11 sectors over a ten-year period (2015–2024), yielding 1,200 firm-year observations, the study employs panel regression and the Generalized Method of Moments (GMM) to address endogeneity. The results reveal that environmental reporting positively and significantly affects firm value, whereas governance reporting exhibits a significant inverse effect. Furthermore, institutional ownership transforms the effects of economic and social sustainability reporting from statistically insignificant to positive and significant. Critically, the GMM estimation confirms a strong positive association for economic reporting (coefficient = 0.6546, p < 0.001), whereas baseline and moderated regressions yield coefficients of -0.1585 (p = 0.864) and -0.2255 (p = 0.090), respectively. This contrast underscores the critical necessity of endogeneity correction in uncovering the true value relevance of sustainability disclosures. The study concludes that institutional ownership significantly moderates how sustainability reporting influences firm valuation. These findings offer practical implications for managers, investors, regulators, and policymakers in emerging markets seeking to leverage institutional investor oversight to maximize the value-enhancing potential of ESG disclosures.