Sustainability Reporting and Firm Value: The Moderating Effect of Board Expertise in Listed Manufacturing Companies in Nigeria

Abstract

This study investigated the moderating effect of board expertise on the relationship between sustainability reporting and the firm value of listed manufacturing companies in Nigeria. An ex-post facto research design was employed, utilizing panel data from 44 firms consistently listed on the Nigerian Exchange Group over a ten-year period from 2015 to 2024. The analysis applied fixed effects regression models to examine the individual effects of economic, environmental, social, and governance sustainability disclosures on firm value, measured by Tobin's Q, and the moderating effect of board expertise on these relationships. The empirical findings revealed a mixed relationship. While economic, environmental, and governance sustainability reporting individually showed insignificant effects on firm value, social sustainability reporting demonstrated a significant positive effect. While board expertise acted as a significant positive moderator for the relationships between firm value and both economic and social sustainability reporting. This indicates that the presence of a knowledgeable and experienced board enhances the value-relevance of disclosures in these indicators. However, the moderating effect of board expertise was found to be statistically insignificant for the relationships involving environmental and governance sustainability reporting with firm value. The study concludes that board expertise serves as a vital corporate governance mechanism that strengthens the positive effect of specific sustainability disclosures on market valuation, particularly in the economic and social sustainability reporting. It is recommended that manufacturing firms not only improve the quality and consistency of their social and economic sustainability disclosures but also strategically enhance the sustainability-related expertise of their board members. Regulatory bodies should encourage such governance improvements to help firms better communicate their long-term value creation strategies to investors.