The study examined the joint prediction of return on asset, board size, and industry type and ownership structure on the likelihood (probability) of disclosing environmental qualitative information. The non-probability sampling technique (judgemental) was used to select 10 industrial and 12 consumer goods companies out of 35 Nigeria listed companies in the two sectors as of 31st December 2017; a total of 132 balanced panels pooled data was obtained viaTabachnick and Fidell, (2007) formula. The study covered a period of six years, that is, 2012-2017. The binomial logistic regression (i.e. linear probability model-LPM) was used to analyze the predictors effect on the likelihood of disclosing environmental qualitative information proxy. Diagnostic tests such as Homer and Lemeshow test were used to address some basic underlying regression analysis assumptions. The results showed that ROA, board size, industry type, and ownership structure jointly explained the likelihood of environmental information disclosure significantly. It is therefore recommended that the Financial Reporting Council of Nigeria (FRCN) should improve on disclosure requirements for companies in Nigeria as it would help companies to disclose more environmental qualitative information to boost stakeholders confidence and reduce the host communitys grievances.
Accounting standards setters all over the globe con-siders the main aim of financial reporting as providing useful information for the benefit of all stakeholders. Management is being required to convey non-financial information that goes beyond what is already con-tained in quantitative disclosure of the annual report. Financial reporting is expected to include both quanti-tative and qualitative information. Insalubrious inform-ation disclosure would repudiate existing and pros-pective investors the opportunity to accurately appraise the company. About 68% of investors acknowledged making use of such reports in reaching their invest-ment decisions (Ernst & Young, 2017; IASB, 2015; Serrasqueiro & Mineiro, 2018; Sierra et al., 2018). Non-financial information disclosures is required for a variety of reasons, including changing stakeholder infor-mation needs, the need to improve business reporting, encourage transparent disclosure standards, promote corporate accountability, minimizes information asym-metry; improves organizational communication with stakeholders and promulgate good corporate gover-nance mechanisms so that users can trust and rely on information disclosed for decision-making. Non-finan-cial information disclosure in corporate reports is also a strategic instrument that can help a company raise capital at the lowest cost possible. Non-financial infor-mation disclosures give investors and other stake-holders with meaningful, relevant, reliable, account-table, and dependable information about the businesss performance and future prospects to aid decision-making (Eccles and Krzus, 2009; Eccles et al., 2011; Flack & Douglas, 2007; Franke, 2018; Ghasempour & Yusof, 2014; Healy & Palepu, 2001; Maroun, 2017).
Despite the importance of non-financial information disclosure in enhancing the transparency of overall reporting practices and establishment of many finan-cial reporting requirements throughout the years, the issue of information disclosure by Nigerian listed firms has remained unsatisfactory; studies show that, in line with international acceptable regulatory guidelines, the level of non-financial information disclosure in Nigeria is still relatively low, even after the implementation of International Financial Reporting Standards (IFRS), which was intended to improve the level of accounting information disclosure. Furthermore, non-disclosure of qualitative data contributes significantly to the pre-mature development of accounting practice in emerg-ing countries such as Nigeria (Amaeshi et al., 2016; Osisioma, 2001; Owolabi et al., 2016 as cited in Olu-wagbemiga, 2014). Divergent studies on the extent of environmental information disclosure have been un-dertaken, and attempts have been made to explain the various levels of environmental information disclo-sure based on various firm characteristics. Financial and non-financial company qualities refer to firm characteristics or unique features that distinguish one company from another. There are several corporate qualities; they are characteristics that distinguish one organization from another. The board size, return on assets, industry type, and ownership structure of the organization are all factors that influence corporate actions, including financial report information disclo-sure (Ali & Isa, 2018; Bose et al., 2017; Islam, 2020; Nassreddine, 2016).
To the best of our knowledge, none of these previous studies from Nigeria have used the afore-mentioned surrogates (board size, return on assets, industry type, and ownership structure) in their studies. Hence, The study objective is to evaluate the combined effect of the aforementioned companies attributes have on the likelihood of environmental information disclosure with the intention of ascertaining environmental information disclosure that is available to respective stakeholders of both consumer goods and industrial goods companies listed in the Nigerian Stock mar-ket.While the research question- what is the joint prediction of return on asset, board size, industry type and owner-ship structure on the likelihood (probability) of environmental information disclosure of listed con-sumer and industrial goods companies in Nigeria? The null hypotheses (H0) is the joint prediction of return on asset, board size, industry type and ownership structure on the probability of environmental information dis-closure of listed consumer and industrial goods com-panies in Nigeria is not significant. The study will be of importance to the divergent stakeholders. The res-earch will assess the joint prediction of companies attributes on probability of environmental qualitative information disclosure in consumer and industrial goods companies listed in the Nigerian stock exchange. The study adopted audited annual reports and accounts as the most important disclosure medium in Nigeria and two sectors of Nigeria stock exchange was studied out of eleven sectors. Based on this limitation, general-izability of the findings should be limited to the same disclosure medium and economic sectors studied.
The study is structured as follows: Section one focuses on introduction, research question and the formulated hypotheses under investigation. Section two presents the literature review, theoretical framework on which the work is based and empirical reviews. Section three is the research method. Section four presents data pre-sentation and analysis while section five details the study findings, conclusion and recommendations.
Review of Literature
Information Disclosure
Corporate disclosure had been referred to as the pre-paration and presentation of voluntary and mandatory regulatory information disclosure necessary for the optimum operation of an efficient capital market and effective corporate governance system. Disclosure means the dissemination of relevant, material, and understandable information, from the private domain to the knowledgeable public domain on a consistent basis. It is therefore, the provision of relevant financial and non-financial information about the organisational activities to the stakeholders (Adesina et al., 2015; FASB, 2000; Hassan et al., 2009; Taposh, 2014; Uyar, 2011). While non-financial information disclosure des-cribes disclosures, primarily outside the financial state-ments, that are not explicitly required by accounting standards, rules and generally accepted accounting principles (GAAP) but they are demanded by govern-ment regulatory agencies. When a firm makes the decision to disclose information voluntarily, it assumes that benefits will outweigh costs. Such benefits may come in the form of the reduced cost of financing investment opportunities (e.g. cost of equity), lower transactions costs for investors by reducing infor-mation asymmetry between the contracting parties and more efficient functioning of capital markets, inform-ation disclosures are being influenced by divergent stakeholders interests, socio and environmental factors surrounding organizations; these the firms need to balance in order to survive and operate efficiently within its environment (Barako, 2007; Enthoven, 1985; Healy & Palepu, 2001; Street & Shaughnessey, 1998; The Association of Investment Management Research (AIMR), 1992; Zarzeski, 1996). Non-financial inform-ation provides evidence of management acumen and operating know-how, and qualitative information usually correlates with quantitative information. Non-financial therefore relates to firms operating methods (Healy & Palepu, 2001). The fear of market failures and competitive disadvantage has made the state or government to use discretion and free will to create laws to make firms disclose certain qualitative infor-mation for the interest of stakeholders (Bos et al., 2008; Vives, 2007). Corporate disclosure falls into two broad categories: mandatory and voluntary. Mandatory disclosure consists of information disclosed in order to comply with the requirements of laws and regulations. On the other hand, voluntary disclosure is any infor-mation disclosed in addition to the mandatory dis-closure. It is free compliance on the part of manage-ments to provide accounting and qualitative infor-mation deemed pertinent to the decision needs of users of their annual reports it also include disclosure “recommended by an authoritative code or body (FASB, 2000; Hassan & Marston, 2010; Meek et al., 1995) which is the focus of the current research. It can be through a variety of means, such as press releases, conference calls, investor and analyst meetings, and field visits with potential and existing institutional investors (Graham et al., 2005; Healy & Palepu, 2001).
There are varieties of recommended frameworks com-panies can select from in reporting voluntary infor-mation disclosure (non-financial report) that are not legally binding, but provide necessary and helpful guidance while drafting a report. The non- financial reporting frameworks are initiatives which are jointly seeking to help the organization in non-financial reporting by ensuring legitimacy, clarity of standards, functionality, learning and engagement, clear commu-nication and significance. According to the Non-financial reporting Directive, in providing the non-financial information companies may rely on national frameworks, Union-based frameworks such as the Eco-Management and Audit Scheme (EMAS), or inter-national frameworks. International frameworks for non-financial reporting are: the United Nations (UN) Global Compact, the Guiding Principles on Business and Human Rights implementing the UN “Protect, Respect and Remedy” Framework, International Inte-grated Reporting Council (IIRC) measures and contri-bute to long-term value and societal organizational roles, the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, the International Organisation for Stand-ardisations ISO 26000, the International Labour Organisations Tripartite Declaration of principles con-cerning multinational enterprises and social policy, the Global Reporting Initiative. If a reporting company relies on a specific framework (national, European or international), it must state it in its report.
FASB (2000) explained that qualitative and quanti-tative information disclosure can be voluntary or man-datory disclosure in the corporate report suggesting that information primarily outside of the financial statements that are not explicitly required or those required by accounting rules or standards. Accounting Standards are the authoritative statements of best accounting practices issued by recognized accountancy bodies relating to various aspects of measurements, treatments and disclosures of accounting transactions and events, relating to how the items which form part of financial statements in the corporate report should be dealt with and presented in firms yearly report. Before adoption of IFRS in Nigeria, financial reporting and preparation of financial statements were basically on the (GAAPs). Auditors decision to accept or reject an engagement was on the GAAP approach before adoption of IFRS as basis for financial reporting with effect from 2012. Generally Accepted Accounting Principles, (GAAPs) vary from one country to another. There is a US GAAP, a UK GAAP and Nigeria GAAP etc. The GAAP in Nigeria refers to: Local company law such as Company and Allied Matters Act, (CA-MA), 2004. The Nigeria accounting standards (State-ment of Accounting Standards-SAS) are issued by Nigeria Accounting Standards Board (NASB) now Financial Reporting Council of Nigeria (FRCN). How-ever, the annual report has been detected in many studies as a significant source of voluntary information and reflects companys overall attitude towards infor-mation disclosure to the public.
Environmental Information Disclosure Variables
Environmental disclosure is the combination of narra-tive including objectives, explanations and numerical information such as emission amount, resources consu-med on a corporations environmental impact for the particular accounting period. It is defined as a syste-matic statement that describes the burden and environ-mental efforts including companys objective, environ-mental policies, environmental activities and impacts, reported and published periodically to the public.
Environmental disclosure is not mandatory in Nigeria that is, not required by law. They do this from pre-ssures from divergent stakeholders. Culture of the organization may also influence such disclosures as may be the preference of dominant management and CEOs. Organizations do this as a way of remaining legitimate in the eyes of the society as there may be benefits to be reaped. Many companies in Nigeria attempt to disclose the measures they take in environ-mental protection for instance, gas emission, water discharge, solid waste disposal, environmental policies; conservation of natural resources, recycling plant of waste products, installation of effluent treatment plant, anti-litter and conservation campaign information. The disclosure of environmental information is based on the document analysis as it is been promoted by pre-vious studies (Bowen, 2009; Gray & Collison, 2002). Although, environmental disclosure is already a wide-spread tendency in organizations, companies do not address this issue on their audited annual report. In-deed, it constitutes a change to firms whose current environmental focus is presented on monetary terms. Another example are the corporate annual report that, usually, disclose their “good” business practices that ensure the sustainability of the business in order to contribute to the maximization of shareholder value, but nothing related to the “bad” business practices of the environment. But, there is a danger of transmitting a false image of firms reports, emphasizing those that are managed positively there are evidence about environmental reporting (ER) to be subjective, because the environmental disclosure can change due to the voluntary basis. Disclosure could be the publication of standards by National Entities or Standard Setting Bodies in different countries about environmental res-ponsibility. In Portugal there is an Accounting and Financial Reporting Standards 26 - Environmental issues, that prescribes the accounting treatment for environmental information in terms of recognition, measurement and disclosure (Chan & Welford, 2005; DeVilliers, 2003; Lamberton, 2009).
Much research in the field of environmental disclosure was conducted through the lens of organizational legi-timacy. The management signals its efforts towards the welfare of particular stakeholders (i.e. the natural environment) and, consequently, communicates a con-gruency of actions and values with those of stake-holders seen as important in the legitimating process (Bowen, 2009). Reporting should be contemplated as a corporate communications tool which helps companies to be judged as “legitimate” by most, if not all, of their stakeholders in order to survive and prosper. Con-ceived as communications tools, annual reports and sustainability reports must focus on the organization as a whole and the task of how its operations are pre-sented to all of its key stakeholders, both internal and external. The extant literature adopts a variety of approaches to the analysis of narratives in annual reports with the implicit underlying construct being the “quality” of disclosure. The semi-objective approaches specify ex ante a list of items and scrutinize the text for their presence, ignoring sections of the text that do not relate to the list. This is the approach taken by the large body of disclosure index studies and it is characterized in this paper as a partial type of content analysis. It is a fairly objective, form-oriented content-analytic method.
Disclosure index studies assume that the amount of disclosure on specified topics is a proxy for the quality of disclosure. Coding schemes incorporate ordinal measures, to allow for the “quality” of the specific dis-closure to be assessed (e.g.is the disclosure on topic X merely qualitative or is it quantified?). Disclosure quality is also important but very difficult to assess. As a result, researchers tend to assume quantity and quality are positively related. Disclosure index studies are based on the general principles of content (or thematic) analysis, which involves classifying text units into categories (Chan & Welford, 2005). Follow-ing coding, the form of analysis and interpretation that is undertaken can vary along a continuum from purely qualitative and verbally descriptive methods, to pri-marily quantitative methods that permit statistical analysis. Sustainability reports offer a window into corporate environmental and social strategy and per-formance, and make it possible to evaluate it as an adjunct to more familiar financial performance metrics. Depending on what companies choose to include in environmental and social performance reports, the reader can assess the degree of compliance with regu-lations, and compare performance with peer companies and across industries.
Companies Attributes
Board size is the number of directors, both the exe-cutive and non-executive members duly elected and appointed to govern the affairs of the company indepe-ndently and responsible in putting the necessary checks and balances. However, there is no one optimal size for a board. Number of board members considered to play a critical role that directly and indirectly affect firm performance (Hieu & Lan, 2015). Accordingly, board size is influenced by companys strategic vision and corporate governance elements and board leader-ship, etc. Literature on board size is of divergent views and results. Some studies results revealed that large board size is an indication of better and viable gover-nance, whereas, some other studies results proved such as wrong and posited that smaller board size enveloped the elements of better governance with outputs of reliable and quality financial reporting. Board size is often used by some scholars to measure the quality of corporate governance and financial reporting. The board of a firm is responsible in ensuring and moni-torin the quality of information in financial reports. Results of several studies have revealed that the twins of sound governance and board composition reduces the adverse effects of earnings management as well as the likelihood of creative financial reporting. Accor-ding to Jensen and Meckling, (1976) a board mem-bership should not exceed seven or eight number in order to function effectively. He further averred that smaller boards enhance communication, increase cohe-siveness and bring about proper and adequate co-ordination, which resultantly make monitoring more effective. If Boards are properly coordinated and do their woks independently, the criticism in them failing to meet their governance responsibilities will reduce. The expected responsibilities of the board been empha-sized are on board independence, board leader-ship structure, board size and committees. Kiel & Nicholson, (2003) view the board as the firms highest level con-trol mechanism, with ultimate responsibility of over-seeing the activities of the firm. The larger the board the more complex it will be as regard decision making. Many scholars argued that the assertion that larger board size connotes viable governance is a miscon-ception. On the contrary other scholars debunked the assertion that larger size boards are better off. Results of empirical study undertaken by Khales et al. (2015) showed that smaller board size is associated with higher firm value. According to (Nyahas et al., 2018) a large board is associated with a non-financial disclo-sure. Prior literature shows that board size plays a significant role in directors viability to check on managers. Padilla, (2002) finds that categorization of board members into different committees largely depends on the size of the board. Serrasqueiro & Min-eiro, (2018) further suggest that larger boards are able to commit more time and effort to monitor man-agement. The functional effectiveness and efficiency of board size hinges largely on the connectivity to the inner workings of the board by various standing board committees which significantly play various suppor-tive roles to complement boards decision-making and supervisory functions. Such departmentalization of functions based on specialized standing committees help shortened board decision making process Taposh, (2014) opines that board effectiveness is thus enhanced through the type and composition of board committees. This is because most of the strategic decisions are undertaken at the committee level. In some countries, board membership is structured to embody standing committees of audit, remuneration, and nomination to assist the boards with the multiple functional respon-sibilities.
Prior literatures have concluded that ownership struc-ture of firms have impact or correlation on firms financial reporting quality and performance. Owing to this, some firms consciously build its ownership struc-ture to attain such desired objective. Institutional investors are viewed dually as “asset managers” and “asset owners”. Asset management enhances the cor-porate value of companies through day-to-day cons-tructive dialogue. Whereas asset owners are oblige-tory to fully disclose their stewardship responsibility policies. Institutional investors have the chance, know-how, skills and resources to influence the performance of the companies and have contributed to dynamic, increased competition professionalism (Shiri et al., 2016). According to Umoren, (2009) irrespective of the influence of institutional owners strategic deci-sions or not is relatively a function of their stake or ownership in the company. Institutions with a high stake in the company have less marketable number of shares and likely will hold them for longer, which exposes institutions to the performance of the company and will give them incentives to actively monitor and try to influence strategic decisions. By virtue of their shareholdings they have the capability of exercising influence in the management of corporations, hence brings about active corporate governance practices. Some of institutional investors act as intermediaries between lenders and borrowers and play critical role in functioning of the financial markets (Gillan & Starks, 2000).
Owing to the specialized knowledge they have, they can gather and interpret financial reports and as well be able to detect managerial opportunism over earn-ings figures. More so, as a result of their degree of investment, they also demonstrated high degree of interest in monitoring a firms non-financial infor-mation disclosure (Rahim et al., 2011; Robert et al., 2005). The composition of investors in the capital structure of firms has the capability of affecting earnings management and will inevitably affect the quality of released accounting information; large shareholders, usually consisting of institutional share-holders, have a high ability to control managers. The rationale is that greater percentage of shares owned by the institutions will lead to a more effective control by shareholders.
Theoretical Framework
Stakeholders Theory
The proponents of stakeholder theory were (Clark, 1916; Dodd, 1932) later presented in management discipline in eighties by Edward Freeman (Freeman & Reed, 1983; Freeman et al., 2004). The theory add-resses the issues of ethics, morality and values in the management and administration of business operations by advancing or charting a new perspective of viewing business corporate image by divergent stakeholders; that is, values and morality are components of econo-mic business activities that are inseparable (Asemah et al., 2013; Freeman et al., 2004; Learmount, 2002).
Stakeholder theory opines that an organization will react to the plea and expectation of influential stake-holders and some of the response will be in the form of strategic information disclosures. It focused on active management of the business environment, relation-ships and the promotion of shared interests in order to develop business strategies. Such strategic information disclosure when viewed in the light of this study is environmental qualitative information disclosure. A popular framework hyped by divergent scholars for addressing organization- environment interactions is stakeholder theory. This approach continues to receive a great deal of attention in recent times as is evidenced by previous studies. While conventional theories of the firm focus on its responsibilities toward its share-holders, a stakeholder perspective takes a broader view and implies that a company should consider the needs of all its stakeholders. This broad view is not without its problems: different stakeholders have differing stakes and balancing the needs of competing stake-holders is not an easy task. Moreover, stakeholder theory is derived from Western notions of (economic) rationality and fails to address needs of several margi-nalized groups like indigenous stakeholders. A stake-holder perspective is also supposed to be helpful in analysing and evaluating an organizations “social performance” in terms of how it manages its relation-ship with society (Carroll, 1999; Clarkson, 1995; Don-aldson & Preston, 1995; Freeman & Reed, 1983; Yi, Davey & Eggleton, 2011).
Stakeholder theory is normative with moral overtones. It focuses on what a company “should” do in order to fulfil its societal responsibilities. It is also instrumental in that it is expected to lead to better organizational performance (a hypothesis that is yet to be tested); and it is descriptive in that it posits a model of the corpo-ration as a constellation of cooperative and competitive interests possessing intrinsic value (Donaldson & Pres-ton, 1995). The normative core of stakeholder theory is said to be a driver of corporate social performance and once managers accept their obligations to stakeholders and recognize their legitimacy, the corporation is well on its way to achieving its moral principles (Clarkson, 1995). This is a simplistic argument that fails to re-cognize the inability of a frame-work to represent different realities and the effects of using a single lens to view issues such as legitimacy and responsibility.
Proponents of stakeholder theory claim that corporate social performance can be evaluated based on the management of a corporations relationships with its stakeholders. Hence, a test whether an issue is social or not is the presence or absence of legislation. Thus, health and safety, equal opportunity, and environ-mental issues are social issues because legislation exists. This is an unsatisfactory argument that fails to address the fact that segments of society are legislated against. For instance, in the case of indigenous com-munities throughout the world, legislation designed to protect their rights is often a legacy of colonialism, regulated by neo-colonial modes of control through neo-colonial institutions. If there is no legislation, the issue becomes a “stake-holder issue” which needs to be addressed at the corporate level (Clarkson, 1995). In an attempt to identify which stakeholders really count, Mitchell et al. (1997) classified stakeholders based on their possession of three attributes: power (the stake-holders power to influence the company), legitimacy (of the stake-holders relationship with the company) and urgency (the extent to which the stakeholders demands require immediate attention). However, the major weaknesses of this theory is applied on con-tinuous basis in organization and sometimes the assessment of the analysis of this theory may be subjective and it is also not possible that all stake-holder interests can be met at the same time and as usual company can give more importance to stake-holders like shareholders of the company instead of employees and natural environment.
Review of Related Empirical Studies
Several extant studies have examined the effect of corporate characteristics on environmental qualitative information disclosure and given empirical evidence on information disclosure in corporate reporting. Guidry & Pattern, (2019) sought to determine why a growing number of environmental disclosure studies are using financial control variables based on argu-ments from the voluntary disclosure theory (VDT). The VDT justifications for these controls are based on assumptions that disclosure is used as a tool for redu-cing information asymmetry between managers and investors. Given the findings reported in a broad sample of legitimacy-based environmental disclosure studies, they sought to determine whether the disclo-sures are primarily aimed at the market, and as such attempt to assess evidence to date on the relation between VDT financial control variables and differ-ences in environmental disclosure. Based on a review of thirteen recent environmental disclosure studies including VDT financial control variables in their analyses, they results show no association with the exception of firm size.
Omoye and Wilson-Oshilim, (2018) studied antece-dents of voluntary environmental disclosure among quoted firms on the Nigerian Stock Exchange. Content analysis and historical data were obtained from finan-cial statements and accounts of 118 sampled firms. The result of the analysis revealed that firm size and profitability have significant and positive relation-ship with environmental disclosure, managerial share-holding has significant influence and negative relation-ship with environmental disclosure while leverage and industry type were statistically insignificant, but lever-age was negatively related while industry type was positively related. Oti & Mbuogar, (2018) evaluated the impact of environmental and social disclosure on the financial performance of quoted oil and gas compa-nies in Nigeria. Time series data for five years were collected and analyzed using the ordinary least square regression technique. Results from the statistical ana-lysis revealed that disclosure on employee health and safety and community development do not signify-cantly affect financial performance while disclosure on waste management had a positive and significant effect on firms financial performance. The study recom-mended that oil and gas companies should constantly review their waste management strategy. Mandatory social and environmental disclosure is considered by Sani, (2018). In his study of the performance evalua-tion of listed Nigerian companies pre and post dis-closure era of 9 listed oil and gas companies listed on the Nigerian Stock Exchange, the study revealed a 53% increase in volume of social disclosure and 25% increase in volume of environmental disclosure after adoption by these companies. The panel regression also showed that company size has a positive and significant relationship with disclosure. Egbunike & Tarilaye, (2017) examined the association between firms specific attributes (firm size, earnings, leverage and governance) and voluntary environmental disclo-sure with evidence from listed manufacturing compa-nies in Nigeria for the period 2011-2015. Results of data analyzed using both descriptive and inferential statistical tools showed a positive relationship between environmental disclosure, firm size, leverage, earnings per share and governance of the studied manufacturing companies in Nigeria. Okoye et al. (2016) ascertained the effect of non-environmental cost disclosure on financial and economic performance of firms listed on Nigeria stock Exchange (NSE). The study adopted expost facto research design to investigate three cement industries listed on Nigeria stock Exchange for the period 2010 to 2014 through simple random sam-pling techniques. Multiple linear regressions were used to test the data obtained from content analysis of the annual reports of the firms. Findings of the analysis showed that non-environmental cost disclosures have significant effect on the firms profitability, efficiency and liquidity. Ndukwe & Onwuchekwa, (2015) analy-zed the determinants of environmental disclosure in Nigeria. Using the binary logistic regression the data collected from annual report of oil and gas companies in Nigeria for the period of 2008-2013. The result of the analysis reveals significant relationship between firm size, profit, leverage and audit firm type with environmental disclosure. Akbaş, (2014) The study further applied content analysis to examine the relation-ship between company characteristics and the extent of the environ-mental disclosures of 62 listed Turkish non-financial firms on the BIST-100 index at the end of 2011 Results of the regression analysis revealed that leverage is not statistically significant with the extent of qualitative information disclosure, while company size has a significant relationship with voluntary disclosure. Andrikopoulos & Kriklani, (2013) studied practices of environmental disclosure on the websites of companies listed on the Copenhagen Stock Ex-change. The study revealed that leverage can affect the volume of environmental disclosure in corporate reports; there is also evidence that Firm size, the market-to-book ratio, and profitability are signifi-cantly associated with environmental disclosure.
In Turkey Akbas, (2014) examined Firm characteris-tics and environmental disclosure of listed companies on BorsaIsantabul. The results show that company size and industry membership are positively related to environmental disclosure while profitability showed a negative relationship with environmental disclosure.
Summary of Literature and Gap Identification
This reviewed show the level of environmental infor-mation disclosures could be determined using com-pany attributes variables- firm size, leverage, profit-ability, listing age board size, and ownership structure variables, etc. Previous studies however, failed to exa-mine a possible influence of companies variables in predicting the probability (likelihood) of environ-mental qualitative information disclosure. Further-more, with the increase in knowledge and interest of researchers to explain dichotomous variables and the consistent use of the traditionally approaches to answer and test research questions and hypotheses with either the ordinary least squares (OLS) or binary regression or linear discriminant function analysis as observed from reviewed studies. These techniques have been subsequently found to be less than ideal for handling dichotomous outcomes due to their strict statistical assumptions, i.e., linearity, normality, and continuity for OLS regression and multivariate normality with equal variances and covariance for discriminant ana-lysis (Gujarati et al., 2012). This study employed the binomial logistic regression (linear probability model-LPM) to fill the observed weaknesses from previous literature by examining the likelihood of the identified variables to explain environmental information disclo-sure likehood. To the best of our knowledge, these observed gaps have not been given adequate attention by studies from Nigeria. Hence, the study distinguishes itself from previous studies in these aspects.
Research Design
The study employed the ex-post facto research design. The study is longitudinal and will cover a six year period, 2012 to 2017, involving listed 21 consumer and 14 industrial companies in the Nigerian Stock Ex-change. The rationale for the choice of the listed firms for a study of this magnitude is because they contribute to national growth and development and command massive followership than non-listed firms due to the size of stakeholders. This study will use panel data.
The sample size observations are derived from Taba-chnick & Fidell, (2007) formula stated as: n 50+8m. Where, n=sample size or observations; 50 and 8 are constant or fixed factors; m= number of predictors (explanatory variables) in a regression model, that is, 5 (we have, board size, return on asset, industry type, ownership structure and leverage). n 50+8(5) =50+40 =90. We have ninety observations, it implies that our observations should not be less than 90 data points but it can be more than 90 observations or data points in order to have a good-fit model result. The non-pro-bability sampling technique (judgemental) was used in selecting 12 twelve consumer and 10 industrial goods listed companies from the thirty-five (35) selected listed companies to form the sample size of 22 selected listed companies based on market capita-lisation and availability of complete audited annual accounts for the period of six years (2012-2017). This is to ensure that company listed on the two sectors are closely related. A total of one hundred and thirty-two obser-vations (132) were studied. The study used classifi-cation table, pie-charts and binomial/binary logistic regression (linear probability model-LPM) to analyse the data. Some conventional diagnostic tests such as Hosmer and Lemeshow Test (Data-fit model predic-tion), Omnibus Tests (Significance of Model Coef-ficients), Box & Twidell, (1962) test (linearity assum-ption test between continuous predictors and the logit (log odds) by using model interaction was equally conducted to address some basic underlying regression analysis assumptions. In logistic regression, the odds ratio represent the constant effect of predictor X on the likelihood that one outcome will occur. The analyses wasper formed via SPSS version-23. Our data confor-med to the basic underlying assumptions of binomial/ binary logistic regression analysis. The decision was based on 5% level of significance. Accept (Ho) if probability value (i.e. p-value) is greater than or equals to stated 5%; otherwise reject and accept (Ha) if p value or sig calculated is less than 5%. Model specifi-cation for company attributes and environmental qualitative information disclosure among Nigeria listed industrial and consumer goods companies was based on linear probability model-LPM: The empirical app-roach used to analyse the effect of companies attri-butes on probability (likelihood) of environmental information disclosure is based on binary choice models which describe the probability of disclosing environmental qualitative information between two mutually exclusive alternatives (disclosure (1) and non-disclosure (0))
ENVID = ƒ(Company Specific Characteristics [CSC]) ….. eqn3.1.1
Eqn.3.5.1 is functional or notational form.
Introduce the measured or observed variables for both exogenous and endogenous variables.
ENVIDit = ƒ(CSC-ROAit, OWNSit, BZit, ITit)… eqn3.1.2
Equations 3.1.1 to 3.1.2 are deterministic model for each research objectives:
ENVIDit = Ɣ0+β1ROAit+β2OWNSit+β3BZit+β4ITit .…… …. eqn 3.1.3
Equations 3.1.4 are binomial logistic regression (lin-ear probability model-LPM): ENVIDit =
Ɣ0+β1ROAit+β2OWNSit+β3BZit+β4ITit ……. eqn 3.1.4
Table 1: Operationalization of Variables.
Fig. 1: Pie-Chart for Environmental qualitative information disclosure Prediction from Board Size, Return on Asset, Industry type and Firms Sizes (Source: Researchers design via Microsoft Excel-2012).
This is known as the sensitivity of prediction, the P (correct event did occur-disclosed), that is, the per-centage of occurrences correctly predicted. We also see that 0.5 allows us to correctly classify 16/47 = 34% of the subjects where the predicted event was not observed. This is known as the specificity of predict-tion, the P (correct event did not occur-undisclosed), that is, the percentage of non-occurrences correctly predicted. Overall our predictions were correct 91 out of 132 times, for an overall success rate of 68.94%. It was only 64.4% for model with intercept only. Deter-mination of error rates in classification. A false positive would be predicting that the event would occur when, in fact, it did not. Our decision rule (0.5) predicted a decision to disclose 106 times. That pre-diction was wrong 31 times, for a false positive rate of 31/106 = 29.25%. A false negative would be predicting that the event would not occur when, in fact, it did occur. Our decision rule (0.5) predicted a decision not to disclose (undisclosed) 26 times. That prediction was wrong 10 times, for a false negative rate of 10/26 = 38.46%. Fig. 1 illustrated the information in pie-chart form.
Answers to Research Questions
What is the joint prediction of return on asset, board size, industry type and ownership structure on the likelihood (probability) of environmental information disclosure of listed consumer and industrial goods companies in Nigeria?
Table 3: Model Summary of return on asset, board size, industry type and ownership structure combined effect on environmental qualitative information disclosure of listed consumer and industrial goods companies in Nigeria [2012-2017].
Source: Researchers computation via SPSS version-23.
Table 3 shows Binomial logistic regression result of Cox-Snell R2 and Nagelkerke R2 values, which are methods of computing the likelihood or probability of dichotomous variable. These values are referred to as pseudo R2 values. The explained variation in the likelihood of environmental information disclosure is based on our model ranges from 12.9% to 17.8%; that is, Cox & Snell R2 or Nagelkerke R2 methods, respect-tively. Our result is based on Nagelkerke R2. This implied that return on asset, (ROA) board size (BZ), industry type (IT) and ownership structure (OWNS) had jointly accounted for 17.8% probability of envi-ronmental information disclosure (EVND). Can we conclude that return on assets, board size, industry type (IT) and ownership structure had not significantly predicted the likelihood (probability) of environmental information disclosure? This impelled us to test of hypotheses.
Test of Hypotheses
The joint prediction of return on asset, board size, industry type and ownership structure on the pro-bability of environmental information disclosure of listed consumer and industrial goods companies in Nigeria is not significant.
Table 4: Model Prediction of environmental information disclosure from return on asset, board size, industry type and ownership structure of listed consumer and industrial goods companies in Nigeria [2012-2017].
Table 4 shows Binomial logistic regression result of Nagelkerke R2 values, which explained variation in the likelihood of dependent variable. Table 4 indicates that there is partial violation of linearity assumption and the data perfectly fit the model prediction [χ2 (8) =4.245; p=.834] (Hosmer & Lemeshow test). The exp-lained variation in the probability of dependent vari-able 17.8%; that is, our model explained 17.8 % (Nagelkerke R2) of the variance in the likelihood of environmental information disclosure and correctly classified 68.94%). Furthermore, the odds ratio (EXP B) of Return on Asset shows 281.7 which means for every one unit increase in return on assets, there is a 281 times more likelihood of environmental infor-mation disclosure to be reported. The odds ratio (EXP B) of Ownership structure show 0.069, this means that for every additional increase in the number of direc-tors, there is 31% less likelihood of environmental disclosure reporting. Furthermore, the odds ratio of board size is 43.06 signifying that for an additional increase in the total number of directors on the com-panies board, there is 43%more likelihood of environ-mental information to be reported. Finally, the odds ratio of Industry type (consumer goods) indicates that consumer goods companies are 16% less likely to report environmental information. The binomial logistic regression model was statistically significant, [χ2 (4) =18.281, p< .05]. Increasing in board size (BZ) was associated with significant increase in likelihood of disclosing environmental qualitative information; but increase in return on asset (ROA) and ownership structure (OWNS) was associated with insignificant reduction in likelihood of disclosing environmental qualitative information. Based on the analysis con-ducted we accept alternate hypothesis (Ha) and reject the null hypothesis (H0) and conclude that return on assets, board size, industry type and ownership struc-ture had significantly predicted the likelihood or probability of environmental qualitative information disclosure of listed consumer and industrial goods companies in Nigeria.
The companies attributes showed varying result in relation to their respective influence on the likelihood or probability of environmental information disclosure; board size had significant influence on the probability (likelihood) of environmental information disclosure; this result cannot be corroborated or refuted by previous studies because the precious studies measure extent or relationship between firms attributes and environmental disclosure. While return on assets, ownership structure and industry type showed insignificant effect on the probability (likelihood) of environ-mental information disclosure of Nigeria listed industrial and consumer goods companies under the period studied or covered.
The influence of return on assets on the probability of environmental information disclosure is an indication that consumer and industrial goods companies disclose less information with lower ROA which is also an indication of low efficiency by management as a result of reduced incentive from a financial performance perspective. The results of board size return on asset, industry type and ownership structure significantly and jointly predicted the likelihood of environmental information disclosure of the studied listed Nigeria consumer and industrial goods companies.
This study investigated the effect of companies attri-butes on environmental information disclosure of listed industrial goods and consumer goods in Nigeria. The following conclusions were reached; company charac-teristics surrogated by profitability (return on assets), board size, and ownership structure and industry type significantly predict the likelihood of environmental information disclosure of the selected studied com-panies. These Firms also showed an improved financial performance than those who do not disclose their environmental information. The information on environ-mental disclosure is not exhaustive as most observed Firms did not include environmental litigation disclo-sure as such information was not readily available in their annual report. Also, there was a significant pre-diction of board size on the likelihood of environ-mental information disclosure of these companies, indicating that environmental information has a great impact on todays customer and legitimacy based economy thereby improving the competitive advantage of these companies.
1) Listed companies should be encouraged to dis-close more environmental qualitative inform-ation related issues due to the inherent advantages therein and this will reduce huge risk of losing patronage of ethical stakeholders and host com-munity grievances and companies will be seen as environmentally friendly firms this will influence performance at the long run.
2) The national accounting standards setters and stock exchange bodies in Africa countries should issue mandatory non-financial information disclo-sure standards that will be adhere to and suitable for Africa business environment this will guaran-tee measurement, recognition and comparison.
Contribution to Knowledge
This study investigated the effect of companies attri-butes on the likelihood of environmental qualitative information disclosure of Nigeria listed consumer and Industrial goods. Previous studies investigated the contribution of single variables of firm attributes to explain Non-financial Information disclosure. The ex-ceptionality of this study is that it combined more than one variable to explain environmental qualitative infor-mation disclosure and the statistical technique and methodological approach adopted is robust and appro-priate to cross examined research data compare to previous related studies. That is, the study employed the binomial logistic regression (linear probability model approach-LPM) to ascertain the probability of these combined variables to influence the likelihood of environmental information disclosure. The regressors to determine the extent each item explains the probability of environmental qualitative information disclo-sure (i.e. disclosed or not disclosed).
Suggestions for Further Study
The following suggestions were reached for further study –
1) An introduction of additional economic sectors and variables not studied in this work to ascer-tain its effect on environmental qualitative information disclosure that will show an exci-ting result and aid policy makers formulate and implement reliable decisions.
2) A comparison of joint effect of companies attributes on environmental information disclosur of different economy sectors in different coun-tries can be conducted.
This work was carried out in collaboration between all authors; they designed the study, performed the statistical analysis, wrote the protocol and wrote the first draft of the manuscript, managed the analyses of the study and the literature search.
Authors read and approved the final manuscript for publication.
Academic Editor
Dr. Liiza Gie, Head of the Department, Human Resources Management, Cape Peninsula University of Technology, Cape Town, South Africa.
Dept. of Accountancy, School of Business Studies, Federal Polytechnic Auchi, Edo State, Nigeria.
Onyinye ME, Atinuke AA, Favour AO, and Daniel JCA. (2022). Nigeria listed companies attributes and environmental information disclosures, Int. J. Manag. Account. 4(6), 117-132. https://doi.org/10.34104/ijma.022.001170132