The Nexus Between Carbon Disclosure Quality and Financial Performance: Evidence from Listed Non-Financial Firms in Nigeria (2010-2024)

This study examines the relationship between the quality of carbon disclosure and the financial performance of listed non-financial firms in Nigeria, a significant emerging economy in Sub-Saharan Africa. Motivated by the global push for environmental sustainability and the nascent state of carbon reporting in Nigeria, the paper investigates whether superior carbon disclosure quality translates to improved financial outcomes. Employing an ex-post facto research design and panel data regression analysis on a sample of 148 firms from 2010 to 2024, we construct a novel Carbon Disclosure Quality (CDQ) index. Financial performance is proxied by Return on Assets (ROA) and Tobin’s Q (TQ). The model incorporates critical control variables: Firm Size (FS), Profitability (FP), Leverage (FLEV), Growth Opportunities (GO), Firm Age (FA), and Liquidity (LIQ). Results from the Fixed Effects estimations reveal a statistically significant positive relationship between CDQ and both ROA and Tobin’s Q. Firm size and profitability also show strong positive associations with financial performance, while leverage exhibits a negative relationship. The findings underscore the business case for robust environmental disclosure in the Nigerian context, aligning with stakeholder and legitimacy theories. The study contributes to the sparse literature on carbon disclosure in Africa, provides a validated measurement framework for CDQ, and offers empirical insights for regulators, policymakers, and corporate managers to strengthen environmental, social, and governance (ESG) reporting frameworks.