Sustainability Reporting and Liquidity Position of Listed Firms in Nigeria

Abstract

The effect of sustainability reporting on the liquidity position of listed entities in Nigeria was investigated using quantitative approach and data extracted from the annual reports of 76 listed companies spanning fourteen years (2010-2023). The sustainability reporting variables included economic, environmental, social, and governance disclosures, while the performance indicator comprised liquidity. Panel regression analysis, specifically the random effects model, was conducted based on the Hausman test results, ensuring robust and reliable findings. Liquidity, as proxied by the Acid Test Ratio (ATR), was significantly influenced by sustainability reporting dimensions, with economic, environmental, social, and governance disclosures exhibiting varying effects. Economic disclosures negatively impacted liquidity, suggesting that firms emphasizing financial transparency may allocate resources to long-term investments or debt servicing rather than maintaining liquid assets. Environmental disclosures also had a significant negative effect on liquidity. Social disclosures negatively impacted liquidity, indicating that investments in community engagement, employee welfare, and other social initiatives might constrain a firm’s ability to maintain liquid assets. Governance disclosures, on the other hand, exhibited a strong positive relationship with liquidity, emphasizing their role in fostering financial discipline and resource optimization. While governance disclosures support the argument that transparency enhances stakeholder confidence and financial outcomes, the negative effects of economic, environmental, and social disclosures highlight the short-term cost implications of addressing diverse stakeholder interests. These findings suggest that firms must carefully balance the competing demands of liquidity management and sustainability reporting to achieve optimal outcomes.