Sustainable Reporting and Profitability of Quoted
Firms in Nigeria: A Multi-Dimensional Panel Data Study
Ngozi G.
Iheduru
Associate
Professor
Department of Accountancy
Faculty of Business Administration
Imo State University
Owerri, Nigeria
Charles U. Okoro
M. Sc
Student
Department of Accountancy
School of Management Sciences
Ken Saro Wiwa Polytechnic
Bori, Rivers State, Nigeria
Abstract
This paper used
cross sectional data to examine the effect of sustainable reporting on the
profitability indicators of Nigeria quoted firms between 2008-2017. Data was
sourced from financial statement of the firms. Twenty firms were selected from
the population of quoted firms in Nigeria. Return on equity, earnings per share
and return on investment were� proxy for
profitability while sustainable reporting was proxied� by economic, social, environmental and
corporate governance disclosure. The panel data model was tested using the
Hausman test. Model one and two validated the fixed effect while model three
validated the random effect. The results found that economic disclosure and
social disclosure have positive but insignificant effect on return on equity of
the selected firms while environmental and corporate governance disclosure have
negative and insignificant effect on return on equity, all the predictor
variables have positive and insignificant effect on earnings per share of the
firms and that economic, social and environmental disclosure have positive
effect on return on investment while�
corporate governance disclosure have negative effect on return on
investment of the selected firms in Nigeria. We recommend that operating environment of the firms should be
well examined and policies should be advanced to manage factors such as
economic, social, environmental and corporate governance disclosures� to leverage the environmental challenges and
enhance profitability, companies should ensure strict compliance to all forms
of
sustainability reporting.
Keywords: Sustainable
Reporting, Profitability, Quoted Firms, Panel Data Study
1. Introduction
The objective of
shareholders wealth maximization is an appropriate and operationally feasible
criterion to choose among the alternative financial actions. Organizations are
generally established with an objective to maximize shareholders welfare while
remaining profitable (Aggarwal, 2013). More
often than not, activities carried on by these organizations tell on their
immediate environment as well as the environment at large.� It provides an unambiguous measure of what
financial management should seek to maximize in making decisions such as
investment, dividend policy and financing decisions on behalf of shareholders (Burhan and Rahmanti, 2012). Financial goals are
quantitative expression of corporate missions and strategies and are set by its
long-term planning system as a tradeoff among conflicting and competing
interest (Duke II, & Kankpang, 2013).
These financial goals guides the maximization of book value of net worth,
market value per share, cash flow, operating profit before interest and tax,
maximizing the ratio of price earning, market rate of return, return on
investment, net profit to net worth, net profit margin, market share and
maximization of the growth in earnings per share, total assets, sales and
ensuring availability of funds(Pandey, 2015).
Every
corporate organization operate� in an
environment where it takes input from processed to� finished or semi- finish product to the
environment (Akani and Briggs, 2018). This process results in externalities
which is the cost and benefit of the corporate organization to the environment.
Environmental accounting involves the identification, measurement and
allocation of environmental costs and the integration of these costs into the
business and encompasses the way of communicating such information to the
stakeholders (Horvathora, 2010). The concept of sustainability reporting
maintains that while a firm strives to achieve its traditional objectives of
profit maximization, it is important that this profit is maximized through
activities that seek to integrate social and environmental considerations into
the decision-making process. Historically advocacy for corporate sustainability
reporting by leading governments has been on the increase with the coming
together of Brazil, Denmark, France and South Africa, in support of the United
Nations Conference on Sustainable Development (Rio+20). The aforementioned
countries attracted the support of the Global Reporting Initiative and United
Nations Environment Programme (UNEP).
Organizations
engage in sustainability reporting to enhance their competitiveness, in
comparison with other companies producing similar product (Jones, 2010).
Competitiveness or standing out among other organizations can be traced to the
goodwill or intangible asset value of the firm because it cannot be physically
measured in monetary terms. A company�s social and environmental issues can
materially affect its overall performance in terms of corporate image and
reputation (Makori and Jagongo, 2013: Aondoakaa, 2015; Babalola and Abiodun,
2012; Munasinghe and Kumara, 2013; Khaveh, Nikhashemi, Yousefi and Haque,
2012). The reporting of these issues among other corporate sustainability
indicators can be traced to demands from various stakeholder groups such as
investors, customers, employees, Non-Governmental Organizations, media and
community, for increased levels of transparency and disclosure, ethical reasons
and community concerns. While there are many studies on financial disclosure
and corporate profitability, there is limited study citabledealing with the
problem of sustainable reporting and profitability of quoted firms in Nigeria,
therefore this study examined the effect of sustainable reporting on
profitability indicators of Nigeria quoted firms.
2. Literature Review
Concept
of Sustainable Reporting
Sustainability
Reporting is a� subset of accounting and
reporting that deals with activities, methods and systems to record, analyze
and report, firstly, environmentally and socially induced financial impacts and
secondly, ecological and social impacts of a defined economic system (Jasch and
Stasiskiene, 2005). Sustainability Reporting deals with the measurement,
analysis and communication of interactions and links between social,
environmental and economic issues constituting the three dimensions of
sustainability. Sustainability Reporting is becoming more prevalent, driven by
a growing recognition that sustainability related issues can materially affect
a company�s performance, demands from various stakeholder groups for increased
levels of transparency and disclosure and the need for companies (and the
business community more generally) to appropriately respond to issues of
sustainable development (Ivan, 2009). It is the practice of measuring,
disclosing and being accountable to internal and external stakeholders for
organizational performance towards the goals of sustainable development.
Theoretical
Framework
Stakeholder theory
The
traditional definition of a stakeholder is any group or individual who can
affect or is affected by the achievement of the organization�s objectives
(Fontaine, Harman and Schmid, 2006). The general idea of the stakeholder
concept is a redefinition of the organization. In general, the concept is about
what the organization should be and how it should be conceptualized. Popa,
Blidisel and Bogdan (2009) maintains that stakeholder theory is based on the
premise that the stronger the companies relationships are with other interest
parties, the easier it will be to meet its business objectives. Stakeholder
theory contributes to the corporate sustainability concept by bringing
supplementary business arguments as to why companies should work toward
sustainable development. Perrini and Tencati (2006) stated that the
sustainability of a firm depends on the sustainability of its stakeholder
relationships; a company must consider and engage not only shareholders,
employees and clients, but also suppliers, public authorities, local community
and civil society in general, financial partners.
Legitimacy Theory
Legitimacy
theory is derived from political economy theory and relies on the idea that the
legitimacy of a company to operate in society depends on an implicit social
contract between the company and society. As described by Deegan (2000)
legitimacy theory asserts that organizations continually seek to ensure that
they operate within the bounds and norms of their respective societies, that
is, they attempt to ensure that their activities are perceived by outside
parties as being legitimate. Managers continually attempt to ensure that their
company complies with its social contract by operating within society�s
expectations. This suggests that managers have incentives to disclose
information that indicates that the company is not in breach of the norms and
expectations of society, therefore, the company attempts to maintain its
survival and continuity by voluntarily disclosing detailed information to
society to prove it is a good citizen.
Political
Economy Theory
The political
economy has been defined by Gray et al. (1996) in Deegan (2007)as the social,
political and economic framework within which human life takes place. Political
economy theory explicitly recognizes the power conflict that exist within
society and the various struggles that occur between various groups within the
society.
The perspective
embraced in political economy theory is that society, politics and economics
are inseparable and economic issues cannot meaningfully be investigated in the
absence of considerations about the political, social and institutional framework
in which the economic activity takes place. It is argued that by considering the
political economy a researcher is better able to consider broader (society) issues
which impact on how an organization operates, and what information it elects to
disclose.
Following from
the above point, Guthrie and Parker (1990) in Deegan (2007:130) explain the
relevance of accounting within a political economy perspective. They state that
the political economy perspective perceives accounting report as social, political
and economic documents. They serve as a tool for constructing, sustaining, and
legitimizing economic and political arrangements, institutions and ideological themes
which contribute to the corporation�s private interests. Political economy
theory relies on the concept that society, politics and economics are
indivisible and economic events cannot be studied in comprehensive manner without
reference to political, social and institutional framework in which the event
occurs. A study of political economy allows researchers to contemplate broader
issues about the information companies elect to disclose in their annual
reports (Guthrie and Parker, 1990 in Kenth and Stewart, 2008).
Accountability Theory
Accountability
theory is concerned with the relationship between groups, individuals,
organizations and the rights to information that such relationships bring
about. Accountability is an act of being responsible or answerable for one�s
own decisions or actions with the expectation of explaining and justifying them
when asked to do so. Simply stated, accountability is the duty to provide an
account of the actions for which one is held responsible (Gray et al., 1991).
The natures of the relationships and the attendant rights to information are
contextually determined by the society in which the relationship occurs. It is
absolutely true that some sort of relationship will exist between an
organization and each of its stakeholders. Part of this relationship may be
economic in nature and the terms determined by the parties as reflecting their
relative powers in the relationship. The information flowing through the
relationship will be determined by the power of the parties to demand it and
the willingness of the organization to provide it (Gray et al., 1997).
Empirical
Review
Asuquo, Dada and Onyeogaziri (2018)examined the effect of sustainability reporting on
corporate performance of selected quoted brewery firms in Nigeria. To determine
the association between sustainability reporting and corporate performance,
data was obtained from the audited financial statements of the three brewery
firms under study for a period of five years (2012-2016). The result of the
study shows that Economic Performance disclosure (ECN), Environmental Performance
disclosure (ENV) and Social Performance disclosure (SOC) have no significant
effect on return on asset (ROA) of selected quoted firms in Nigeria.
Olayinka
and Temitope (2011) empirically examined the relationship between corporate
social responsibility and financial performance in Nigeria and found out that
corporate social responsibility has a positive and significant relationship
with the financial performance measures, Yahya and Ghodratollah (2014) employed
multiple-linear regression analysis to��
investigate the impact of corporate social responsibility disclosure
(CSRD) on the financial performance of companies listed on the Tehran stock
exchange. The independent variable (CSRD) was measured by economic, social and
environmental indices while Return on Assets, Return on Equity and Price
Earnings Ratio were used in measuring financial performance. The analysis
produced inconsistent results.
Onyekwelu
and Ekwe (2014) Used ordinary least square regression to�� examine whether corporate social responsibility
predicates good financial performance using the banking sector in Nigeria. The
findings of their study show that the amount committed to social responsibility
vary from one bank to the other. It further revealed that the sample banks
invested less than ten percent of their annual profit to social responsibility.
Onyekwelu and Ugwuanyi (2014) carried out a research on Corporate Social
Accounting and Enhancement of Information Disclosure among Firms in Nigeria and
found out that the inclusion and separate presentation of social costs incurred
by organizations in the financial statements will enhance information
disclosure in the statement.
Nze,
Okoh and Ojeogwu (2016) examined using the ordinary regression analysis the
effect of corporate social responsibility on earnings of quoted firms in
Nigeria in the oil and gas sector over a ten-year period and found out that
corporate social responsibility has a positive and significant effect on
earnings of firms studied.
Babalola
and Abiodun (2012) concluded that variations in selected firms performance were
caused by changes in CSR reporting after analyzing ten firms in Nigeria for
over 1999-2008. Aupperle, Carroll and Hatfield (1985) analyzed the relationship
between corporate social responsibility and profitability of the companies
listed in Forbes 1981 Annual Directory and concluded that there was no
relationship between social responsibility and profitability. Murray, Sinclair,
Power and Gray (2006) studied the relationship between social and environmental
performance disclosure and financial market performance of companies in UK and
found no significant relationship between environmental reporting and market
performance.
Aggarwal
(2013) ascertained whether sustainable companies are more profitable. Using regression
analysis, he established that sustainability has significant but varying impact
on financial performance. Munasinghe and Kumara (2013) ascertained the
relationship between Corporate Social Responsibility (CSR) and financial
performance to see what motivates firms to voluntary initiate CSR activities.
Using Spearman�s rank-order correlation they found out that Return on Equity
and Return on Assets were positively correlated and significant.
Makori
and Jagongo (2013) investigated into whether there is any significant
relationship between environmental accounting and profitability of selected
firms listed in India. Using multiple regression analysis, they found that
there is significant negative relationship between Environmental Accounting and
Return on Capital Employed (ROCE) and Earnings per Share (EPS) and a
significant positive relationship between Environmental Accounting and Net
Profit Margin and Dividend per Share.
Robbins (2011)
found that most executives believe that corporate social responsibility
reporting can improve profits. They understand that corporate social
responsibility can promote respect for their company in the market place which
can result in higher sales, enhance employee loyalty and attract better
personnel to the firm. Also, corporate social responsibility reporting
activities focusing on sustainability issues may lower costs and improve
efficiencies as well. Robbins (2011) observed that reviewing individual
empirical studies can be confusing. But by using the technique of Meta-analysis
many studies can be statistically analyzed to determine collective results.
Duke and Kankpang (2013) ascertained the effect of corporate social responsibility
activities on the financial performance of firms operating in some of the industries
that have the greatest impact on the environment in Nigeria. Using multiple regression
analysis they revealed that waste management, pollution abatement are both
significantly and positively associated with firm performance. Makori and
Jagongo (2013) investigated into whether there is any significant relationship
between environmental accounting and profitability of selected firms listed in
India. Using multiple regression analysis they found that there is significant
negative relationship between Environmental Accounting and Return on Capital
Employed (ROCE) and Earnings per Share (EPS) and a significant positive
relationship between Environmental Accounting and Net Profit Margin and Dividend
per Share. Researching on the impact of sustainability performance of company
on it financial performance, a study of Indian companies Aggarwal (2013)
ascertained whether sustainable companies are more profitable. Using regression
analysis he established that sustainability have significant but varying impact
on financial performance. Munasinghe and Kumara (2013) ascertained the
relationship between Corporate Social Responsibility (CSR) and financial
performance to see what motivates firms to voluntary initiate CSR activities.
Using Spearman�s rank-order correlation they found out that Return on Equity
and Return on Assets were positively correlated and significant. The empirical
studies examined above are mainly foreign studies with few studies of citable
significant on the Nigeria business environment.
3. Methodology
This
study used quasi experimental research design.. This approach combines
theoretical consideration (a prior criterion) with the empirical observation
and extract maximum information from the available data. It enables us
therefore to observe the effects of explanatory variables on the dependent
variables.
Firms that were studied
are those that are quoted on the floor of Nigerian Stock Exchange (NSE). The
target size of 20 quoted firms was drawn from various sub-sections/industries,
based on the NSE classification. The Annual Financial Statements of the
respective firms for ten years running were our major focus. The necessary data
for our analysis were obtained from various years of NSE Fact-book. The study adopted the longitudinal time dimension,
specifically the panel study type. The panel regression equation is different
from a regular time-series or cross section regression by the double subscript
attached to each variable. The general form of the panel data model is
specified as:
The
subscript i denotes the
cross-sectional dimension and t represents the time-series dimension.
The left-hand variable y represents the dependent variable in the model
which represents the value relevance of firms listed on the Nigeria Stock
Exchange,
Model
Specification
The objective of
this section is to develop models to employ to find the validity of the
hypothesis: that sustainability reporting enhances profitability of quoted
firms..� Multiple Linear Regression
Technique (applying time series), and Analysis of Variance Technique was used
to generate the models in this study. The study used
positive quantitative research paradigm which is appropriate because it enables
the capturing of knowledge through measurements of phenomena in which
mathematical and statistical procedures are used to describe, predict and
explain behavioral phenomena (Krasuses, 2005). The study is basically a
quantitative research that aimed at examining the effect of sustainable
reporting on profitability indicators of Nigeria quoted firms.
The regression models are thus formulated as
���������������
���������������
���������������
Where
ROE = return on equity
EPS = Earnings per share
ROI = Return on investment
ECD = Economic disclosure
SON��
= Social Disclosure
ENVD = Environmental disclosure
CGD = Corporate governance
disclosure�
t ������������� = ������������ Time dimension of the variables
α 0 �������� = ������������ Constant or intercept.
Method of Estimation and Testing
i.
Panel data regression model
specifications
Panel data can be estimated and analyzed in three�� different��
specification�� models. These are
the correlation matrices the Fixed Effect Model (FEM) and the Random Effect
Model (REM).� In this study the fixed
effect model is chosen over pooled OLS regression because�� of the��
advantages�� the former has over
the latter.
ii.�� Pooled
Regression Model
To
obtain a reliable and unbiased estimated the analysis, this estimation method uses the classical linear
regression assumptions which according to Albrigim Zappe and Winston, (2011)
stipulate that the error term should be independently and normally distributed
with zero mean and constant variance and more importantly must not correlated
with the independent variables pooled OLS linear regression is given as
follows:
�where Yitis the dependent
variable;
Iii.
The fixed effect model
The fixed effect mode is highly comparable to the pooled OLS
regression model in the sense that the slope coefficient is the same for all
cross sectional and that the intercept
remains unchanged across time. Employing the fixed effect least-squares dummy
variable (LSDV)approach the issue of heterogeneity is taken different��� intercepts��� for���
every cross sectional and�
(Brooks, 2008). The fixed model can be specified as
Random Effects
Random effects focus on the
relationship with the study sample as a whole; thus, the samples are randomly
selected, as opposed to using the entire population. The total sample
regression (a function of the random effect) can be expressed as:
If this is represented with
random variables, then
4. Results and Discussion
This section
presents analysis and findings of the study as set out in the research
objective and research methodology. The study sought to establish the effect of
sustainable reporting on the profitability indicators of quoted firms in
Nigeria. Results in the tables below contain details on the effect of
sustainable reporting on the profitability indicators of the 20 selected quoted
firms in Nigeria.
Table i: the
effect of sustainable reporting on the return on equity of quoted firms in
Nigeria.
|
Panel A:�
Correlated Random Effects - Hausman Test |
|
|||
|
Test Summary |
Chi-Sq. Statistic |
Chi-Sq. d.f. |
Prob. |
|
|
Cross-section random |
11.112130 |
5 |
0.0000 |
|
|
Cross-section random effects test
comparisons: |
||||
|
Variable |
Fixed |
Random |
Var(Diff.) |
Prob. |
|
ECD |
0.476024 |
0.453448 |
0.090455 |
0.9402 |
|
SOD |
0.183524 |
0.192809 |
0.002145 |
0.8411 |
|
ENVD |
-0.147233 |
-0.143443 |
0.007228 |
0.9644 |
|
CGD |
-0.667807 |
-0.663585 |
0.000262 |
0.7943 |
PANEL
B: Regression
results
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
ECD |
0.476024 |
1.380493 |
0.344822 |
0.7313 |
|
SOD |
0.183524 |
0.145949 |
1.257456 |
0.2128 |
|
ENVD |
-0.147233 |
0.154718 |
-0.951618 |
0.3446 |
|
CGD |
-0.667807 |
0.234754 |
-2.844709 |
0.0058 |
|
C |
10.18255 |
1.378952 |
7.384264 |
0.0000 |
|
|
|
|
|
|
|
|
Effects Specification |
|
|
|
|
Cross-section fixed (dummy
variables) |
|
|||
|
R-squared |
0.650012 |
Mean dependent var |
10.19322 |
|
|
Adjusted R-squared |
0.480730 |
S.D. dependent var |
1.292761 |
|
|
S.E. of regression |
1.081038 |
Akaike info criterion |
3.186850 |
|
|
Sum squared resid |
81.80496 |
Schwarz criterion |
3.742363 |
|
|
Log likelihood |
-123.4082 |
Hannan-Quinn criter. |
3.410865 |
|
|
F-statistic |
3.014502 |
Durbin-Watson stat |
1.265173 |
|
|
Prob(F-statistic) |
0.000412 |
|
|
|
Source: extract
from E-View 9.0
Panel A of the results test the validity of fixed and random effect, from the
results the probability of the Hausman test is less than the critical value of
0.05, therefore fixed effect result is accepted.� Panel B presents the regression effect of
sustainable accounting on the profitability indices of Nigeria quoted firms.
The results proved that 65 percent variation on the return on equity of the
quoted firms can be explained by variation on the four predictor variables on
sustainable reporting. Probability of F-statistics found that the model is
statistically significant while the Durbin Watson Statistics proved the absence
of serial autocorrelation. The probability coefficient of the variables found
that there are no statistical differences between the fixed and the random
effect. Regression coefficient of the variables justifies that economic
disclosure and social disclosure have positive but insignificant effect on return
on equity of the selected firms while environmental and corporate governance
disclosure have negative and insignificant effect on return on equity.
Table
ii: the effect of sustainable reporting on earnings per share of quoted firms
in Nigeria.
|
PANEL C: Correlated Random
Effects - Hausman Test |
|
|
||||||
|
Test Summary |
Chi-Sq. Statistic |
Chi-Sq. d.f. |
Prob. |
|
||||
|
Cross-section random |
36.581216 |
5 |
0.0000 |
|
||||
|
Cross-section random effects test
comparisons: |
|
|||||||
|
Variable |
Fixed |
Random |
Var(Diff.) |
Prob. |
|
|||
|
ECD |
0.136702 |
-0.144138 |
0.000499 |
0.7393 |
|
|||
|
SOD |
0.117696 |
-0.176701 |
0.002281 |
0.2167 |
|
|||
|
ENVD |
0.104710 |
-0.123441 |
0.003877 |
0.7636 |
|
|||
|
CGD |
0.091056 |
0.008413 |
0.001509 |
0.0334 |
|
|||
|
Panel D:
Regression Effect of Sustainable Reporting on earnings per share |
|
|
||||||
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
||||
|
ECD |
0.136702 |
0.107798 |
1.268128 |
0.2131 |
||||
|
SOD |
0.117696 |
0.152467 |
0.771945 |
0.4453 |
||||
|
ENVD |
0.104710 |
0.177639 |
0.589451 |
0.5593 |
||||
|
CGD |
0.091056 |
0.088776 |
1.025678 |
0.3121 |
||||
|
C |
15.40232 |
5.477468 |
2.811942 |
0.0080 |
||||
|
|
Effects Specification |
|
|
|||||
|
Cross-section fixed (dummy variables) |
|
|||||||
|
R-squared |
0.600437 |
Mean dependent var |
11.45720 |
|||||
|
Adjusted R-squared |
0.440612 |
S.D. dependent var |
7.116944 |
|||||
|
S.E. of regression |
5.322920 |
Akaike info criterion |
6.425246 |
|||||
|
Sum squared resid |
991.6718 |
Schwarz criterion |
6.998853 |
|||||
|
Log likelihood |
-145.6312 |
Hannan-Quinn criter. |
6.643679 |
|||||
|
F-statistic |
3.756843 |
Durbin-Watson stat |
1.517175 |
|||||
|
Prob(F-statistic) |
0.000734 |
|
|
|
||||
Source: extract from E-View 9.0
Again Panel C of
the results justifies the validity of fixed effect, from the results the
probability of the Hausman test is less than the critical value of 0.05,
therefore fixed effect result is accepted.�
The differences between the fixed and random effect is statistically not
significant. From panel D, the results found that 60 percent variation on the
earnings per share of the firms can be predicted by variation on the four
predictor measures of sustainable reporting, this justifies by the significant
of the f-statistics and probability while Durbin Watson statistics proved the
absence of serial autocorrelation. The beta coefficient of the variables proved
that all the predictor variables have positive and insignificant effect on
earnings per share of the firms.
Table iii: the
effect of sustainable reporting on earnings per share of quoted firms in
Nigeria.
|
PANEL E: Correlated Random
Effects - Hausman Test |
|
|||
|
Test Summary |
Chi-Sq. Statistic |
Chi-Sq. d.f. |
Prob. |
|
|
Cross-section random |
6.809936 |
4 |
0.1463 |
|
|
Cross-section random effects test
comparisons: |
||||
|
Variable |
Fixed |
Random |
Var(Diff.) |
Prob. |
|
ECD |
-0.071848 |
0.507468 |
0.278045 |
0.2719 |
|
SOD |
0.191573 |
0.255089 |
0.001098 |
0.0452 |
|
ENVD |
0.204147 |
0.242534 |
0.000344 |
0.0385 |
|
CGD |
-0.199820 |
-0.096867 |
0.009577 |
0.2928 |
Panel
F: Regression Effect of Sustainable Reporting on Return on Investment
|
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
|
ECD |
0.507468 |
0.133505 |
3.801108 |
0.0006 |
|
SOD |
0.255089 |
0.082570 |
3.089357 |
0.0041 |
|
ENVD |
0.242534 |
0.089788 |
2.701187 |
0.0108 |
|
CGD |
-0.096867 |
0.166405 |
-0.582116 |
0.5644 |
|
C |
0.678448 |
0.355450 |
1.908701 |
0.0650 |
|
|
Effects Specification |
|
|
|
|
|
|
|
S.D. |
Rho |
|
Cross-section random |
0.820470 |
0.8612 |
||
|
Idiosyncratic random |
0.329343 |
0.1388 |
||
|
|
Weighted Statistics |
|
|
|
|
R-squared |
0.843470 |
Mean dependent var |
0.485215 |
|
|
Adjusted R-squared |
0.824497 |
S.D. dependent var |
0.908805 |
|
|
S.E. of regression |
0.351364 |
Sum squared resid |
4.074075 |
|
|
F-statistic |
44.45550 |
Durbin-Watson stat |
1.274413 |
|
|
Prob(F-statistic) |
0.000000 |
|
|
|
|
|
Unweighted Statistics |
|
|
|
|
R-squared |
0.825726 |
Mean dependent var |
2.191316 |
|
|
Sum squared resid |
36.37256 |
Durbin-Watson stat |
0.252859 |
|
Source: extract from E-View 9.0
Further Panel E
of the results justifies the validity of random effect, from the results the
probability of the Hausman test is less than the critical value of 0.05,
therefore fixed effect result is accepted.�
The differences between the fixed and random effect is statistically not
significant. From panel F, the results found that 60 percent variation on the
earnings per share of the firms can be predicted by variation on the four
predictor measures of sustainable reporting, this justifies by the significant
of the f-statistics and probability while Durbin Watson statistics proved the
absence of serial autocorrelation. Beta coefficient of the variables proved
that economic, social and environmental disclosure have positive effect on
return on investment while� corporate
governance disclosure have negative effect on return on investment of the
selected firms in Nigeria. The
positive� effect� of the variables confirm the findings of
Asuquo, Dada and Onyeogaziri (2018)that Economic Performance disclosure,
Environmental Performance disclosure and Social Performance disclosure� have no significant effect on return on
asset� of selected quoted firms in Nigeria.
Findings
of the study show that economic disclosures do not significantly affect return
on equity of selected quoted firms in Nigeria. This result is plausible in real
business situations. The performance of firms depend heavily on firms pricing
and volume of sale rather than disclosures of figures from previous financial
periods. This result contradicts the findings of Makori and Jagongo (2013), who
posited that environmental accounting has a significant influence on
profitability in India. The authors argued that disclosing firm� activities
carried out for the community it is domiciled influences the customers�
patronage of firms� products. The findings also showed that Environment
disclosure have effect on earnings per share. This finding contradicts the
position of Murray, Sinclair, Power and Gray (2006), who posited social and
environmental performance disclosures do not significantly affect financial
market performance in UK companies� The
result shows that Social disclosures significantly affect return on investment
of firms. The social expenditure carried out by the company is usually a small
part of the firms� total expense that is used to obtain profits of the firm.
This result confirms Olayinka and Temitope (2011) results that corporate social
responsibility disclosures significantly affect financial performance of firms.
The social expenditure carried out by the company is usually a small part of
the firms� total expense that this used to obtain profits of the firm.
5. Conclusion and Recommendations
Generally,
disclosures about issues away from mandatory requirements of the regulatory
standards do not significantly affect profits as seen by the results of this
research. Stakeholders look out for information about the trading activities
and valuation measures of items in the financial statement, though
sustainability reporting highlights areas of new interest in financial
accounting which may eventually become significant variables that influence
performance measures of companies. Sustainability Reporting provides a
framework to create value for stakeholders which translates to satisfying the
interest of diverse group of stakeholders. This work is anchored on stakeholder
theory since it is propagated by stakeholder theory that managers should manage
a firm for the benefit of all stakeholders. This is in agreement with legitimacy
theory which emphasize that organizations continually seek to ensure that they
operate within the bounds, norms and expectations of their societies and
therefore, a company should maintain its survival and continuity by voluntarily
disclosing detailed information to stakeholders to prove it is a good citizen.
From the findings, the study concludes that there is significant relationship
between sustainable reporting and profitability of quoted firms in Nigeria. It
therefore recommends that:
� Operating environment
of the firms should be well examined and policies should be advanced to manage
factors such as economic, social, environmental and corporate governance to
leverage the environmental challenges and enhance profitability.
� Companies should
ensure strict compliance to all form of sustainability reporting, All cost incurred�
in the process of business transaction should be properly reported in
the financial statement and accounted for to enhance profitability of the firm
.
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