VALUE RELEVANCE OF SUSTAINABILITY REPORTING IN THE OIL AND GAS SECTOR IN NIGERIA

Abstract

Does non-financial information have any financial value? There is a debate on whether reporting non-financial information such as reporting the social and environmental impact of the activities of a corporation is relevant information for decision by users of the information, which can affect the value of the corporation. Using the Ohlson (1995) model which was modified, the study used share price as a measure of the value of the oil and gas firms studied, and a strict bias for only GRI social and environmental disclosures, as explanatory variables. Applying regression analysis, the study found that social information disclosure is relevant for making decisions that can lead to positive and significant change in share price. Environmental disclosures on the other hand were found not to have any value relevance. The study advocated for full compliance to the GRI social disclosures by the oil and gas firms for optimum firm value, which should also lead to increased societal and communal acceptance through the corporate social responsibility efforts. In addition, the study recommends that oil and gas firms, because of the nature of their activities on the environment, should be mandated by relevant regulatory authority to disclose their environmental performance using the GRI parameters.