Do ESG Disclosures Reduce Stock Price Crash Risk? Evidence from Nigerian Listed Firms

This study examines whether environmental, social, and governance (ESG) disclosures reduce stock price crash risk among firms listed on the Nigerian Exchange Group (NGX). Drawing on agency theory, information asymmetry theory, and stakeholder theory, we hypothesize that greater ESG transparency attenuates managers' incentives to hoard negative information, thereby reducing the likelihood of abrupt, large-magnitude stock price declines. Using panel data from 120 non-financial firms spanning 2013 to 2023, we construct two widely adopted crash risk proxies — negative conditional skewness (NCSKEW) and down-to-up volatility (DUVOL) — and estimate fixed-effects regressions with a comprehensive set of control variables, including firm size, leverage, profitability, growth opportunities, board composition, ownership structure, market volatility, trading volume, GDP growth rate, inflation rate, and industry type. Our findings reveal that ESG disclosure quality is significantly and negatively associated with both crash risk measures, even after controlling for macroeconomic shocks and firm-level heterogeneity. The environmental and governance sub-pillars drive the strongest effects, while the social pillar exerts a more modest influence. The results are robust to alternative crash risk proxies, instrumental variable estimation to address endogeneity, and sub-sample analyses. This study contributes original evidence from an underexplored emerging economy context and carries direct implications for regulators, investors, and corporate boards seeking to harness ESG transparency as a tool for financial stability.