Mandatory and voluntary segment disclosures of listed companies in Nigeria: A recursive transition matrix analysis

Mandatory and voluntary segment disclosure is crucial for shareholders to assess a firm’s financial health and make informed investment decisions. Given the importance of disclosure to investors, this study investigates the extent of voluntary and mandatory segment disclosure of listed companies in Nigeria from 2015 to 2022. Using descriptive analysis, specifically a recursive transition matrix approach, this study tracked yearly changes in mandatory and voluntary segment disclosure for 85 companies listed on the Nigerian Exchange Group. The findings revealed that mandatory segment disclosure has a mean score of 11.3, which is notably higher than the mean score of 6.86 for voluntary segment disclosure. Also, the recursive transition matrix revealed a notable increase in companies transitioning from lower to higher levels of mandatory segment disclosures. For instance, 87.5% of companies were at Level 1 (Low-level disclosure) in 2016, but this dropped to 35.4% by 2022, showing a shift to higher levels. Levels L2, L3, and L4 remained relatively stable, indicating sustained improvements. This trend reflects the impact of regulatory changes on the increased transparency of companies in Nigeria. For voluntary segment disclosures, in 2016, 72.5% of companies were at L1, 25% moved to L2, and 2.5% advanced to L3. By 2022, the percentages were 41.1% at L1, 34% at L2, and 24.9% at L3. Although some companies have progressed, many continue to maintain low levels of voluntary segment disclosure. The study concluded that listed companies in Nigeria need to improve their voluntary segment disclosures to enhance transparency and address investors’ concerns about inadequate segment disclosure practices among firms.