HOW DOES ESG DISCLOSURE AFFECT COST OF DEBT IN NIGERIA HEALTH

SECTOR

Adewale Damilola ADEDEJI

MATRIC NO: 170601151

A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING, FACULTY OF

ADMINISTRATION AND MANAGEMENT SCIENCES, ADEKUNLE AJASIN
UNIVERSITY, AKUNGBA AKOKO, ONDO STATE, NIGERIA. IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF
SCIENCES DEGREE (B.Sc.). IN ACCOUNTING.

DR. O. E. IGBEKOYI
MARCH, 2023
 CERTIFICATION
This is to certify that this project was carried out by Adewale Damilola ADEDEJI with
matriculation number 170601151 under our supervision in the Department of Accounting,
Faculty of Administration and Management Sciences, Adekunle Ajasin University, Akungba-
Akoko, Ondo State, Nigeria.
 
 
 
 
_________________________  
______________________
     Dr. Igbekoyi O. E
Date
         Supervisor
 
 
 
_________________________               _______________________
      Dr. Alade, M. E            Date
Head of Department
 DECLARATION 
I, Adewale Damilola ADEDEJI with matriculation number 170601151 declare that this research
was carried out under the supervision of the Department of Accounting,
Adekunle Ajasin University, Akungba-Akoko, Ondo State. I attest that this project has not been
presented either wholly or partially for the award of any degree elsewhere
 
 
 
 
  
______________________ 
Adewale Damilola ADEDEJI   Signature & Date
 DEDICATION
This project work is dedicated to God Almighty who in love and grace gave me the
opportunity to complete this research work.
 ACKNOWLEDGEMENTS

 To the God of possibilities, I give all praises to God Almighty, for his help throughout my
academic program in Adekunle Ajasin University, Akungba-Akoko Ondo State, and also for His
constant help in completing this research work in spite of all odds. 
My sincere gratitude goes to my supervisor, Dr. Igbekoyi O.E.  for her motherly love and
care, guidance, assistance and tolerance throughout the course of this research work, who
demonstrated intense interest in my research work by taking the pain of reading through it and
making necessary corrections and several useful suggestions at every point of this research work.
God bless you and your family more abundantly. 
My honest gratitude also goes to my amiable Head of Department (HOD Accounting) in
person of Dr. Alade M.E. for his profound tutelage. My gratitude also goes to lecturers, and non-
teaching staff of the Department of Accounting: Prof. Felix Olurankinse, Dr. Igbekoyi O.E.
the immediate past Head of Department, Dr. Oladutire E.O., Dr. Agbaje W.H, Dr. Adegbayibi
A.T., Dr. Adeusi S.A, Mr. Olabisi O.S., Mrs. Odugbemi O.M. , Mr. Aiyesan O.O. Mr.
Adegboyegun A.E. , Mr. Oloruntoba S.R. and Mrs. Olukayode F. Your impact in my life during
my stay on campus cannot be overemphasized. 
I want to sincerely appreciate my mother Mrs. Ronke Adedeji, my uncles, Gbenga
Ademisoye, Toyese Ademisoye my sisters Tope and Seyi Alakija for their love, advice, financial
support, and prayers throughout my academic program. May you live to eat the fruits of your
labour.
Finally, this list will not be complete if I do not acknowledge the support of my amiable
friends Stephen Victor, Oni Abimbola, Abiodun Olubokun, Falola Jumoke, Sunday Emmanuel,
Seyi, Kemi, Sarah, Babs. For their compassionate kindness and support towards the completion
of this project work and my other colleagues for their efforts during the course of this program. I
love you all, God bless.  
 TABLE OF CONTENTS
Title Page
i
Declaration
ii
Certification
iii
Dedication
iv
Acknowledgement
v
Table of contents                                                                 vi
List of Tables          
ix
List of Abbreviation          
x
Abstract  
xi
 
CHAPTER ONE: INTRODUCTION
1.1  Background to the Study
1
1.2  Statement of the Problem
4
1.3  Research Questions
6
1.4  Objectives of Study
6
1.5  Research Hypothesis
7
1.6  Significance of the Study
7
1.7 Scope of the Study
8
1.8 Operational Definition of Terms
8
CHAPTER TWO: LITERATURE REVIEW
2.1  Conceptual Review
10
2.1.1  Corporate Social Responsibility
10
2.1.1.2 Firm Financial Performance
13
2.1.1.3 Return on Assets
15
2.1.1.4 Return on Equity
17
2.1.1.5 Tobin’s Q
19
2.1.2 CSR and Financial Performance
20
2.2  Theoretical review
21
2.2.1 Shareholder theory
21
2.2.2 Stakeholders theory
22
2.3  Empirical Review
24
2.4  Gap in Literature
31
CHAPTER THREE: METHODOLOGY
3.1 Research Design
32
3.2  Source of Data
32
3.3  Population of the Study
33
3.4  Sample size and Sampling Technique
33
3.5  Data collection Instrument
33
3.6  Model specification
33
3.7  Measurement of Variables
34
3.8  Data Analysis Technique
35
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS,AND DISCUSSION OF
FINDINGS
4.1 Descriptive Statistics36
4.2  Correlation Matrix of Dependent and Independent Variables
37
4.3  Random Regression Result for CSR and ROA Relationship
40
4.4  Random Regression Result for CSR and ROE Relationship
41
4.5 Random Regression Result for CSR and Tobin Q Relationship
42
4.6.1 Evaluate the effect of corporate social responsibility on firm’s return on
 assets
45
4.6.2 Assess corporate social responsibility effect onfirm’s return on equity 43
4.6.3Ascertain the effect of corporate social responsibility on firm’s Tobin Q 44
CHAPTER FIVE: SUMMARY, CONCLUSION, AND RECOMMENDATIONS
5.1 Summary
47
5.2 Conclusion
48
5.3 Recommendations
48
    REFERENCES
50
    APPENDIX
55
 LIST OF TABLES
Tables

3.1 Definition of Variables

4.1  Descriptive statistics
4.2 Correlation Matrix
4.3 Unit Root Test
4.4 Variance Inflation Factor
4.5 Regression Estimate
 LIST OF ABBREVIATIONS

CSR Corporate Social Responsibility

ROA Return on Asset
ROE Return on Equity
NGX Nigeria Exchange Group
SEC Securities and Exchange Commission 
ESG Environmental, Social, and Govern
 ABSTRACT
  Environmental pollution has a negative health impact on workers and their performance on the
one hand and society on another hand even those who define the objectives of the unit to
increase profits in the short term realize that society’s image affects its profits and its ability to
generate revenue. It is in this light that the study examine how ESG disclosure establish the
impact of social disclosure on cost of debt of listed health sector companies in Nigeria.
The study collected data from published annual reports of selected firms and fact
books published by the Nigeria Exchange Group. A sample size of six (6) listed healthcare
sectors was selected using purposive sampling techniques and the study population comprises all
the (7) healthcare sectors listed on the Nigeria Exchange group as at 31st December 2021. This
study adopted an ex-post facto research design. The choice of this research design is based on the
premise that the study involved the use of already available data that cannot be manipulated from
the period between 2017 -2021. The study collected data from published annual reports of
selected firms and fact books published by the Nigeria Exchange Group.
The findings of the study showed that ESG disclosure has negative and in significant effect on
the cost of debt of listed healthcare firms in Nigerian’s specifically, social and disclosure has
positive effect while environment disc closure have a negative . 
The study, therefore, concludes that in explaining the effect of the cost of debt, ESG
disclosures are paramount. However, there should be adequate disclosure of environmental,
social, and governance practices necessary in reducing the cost of debt. The study recommends
that the Management of healthcare firms should carefully assess the environmental factors
particular to its operations and adopt relevant environmental policies and disclosures that seek to
address the negative impact of those factors.

 
 CHAPTER ONE

INTRODUCTION
1.1 Background to the Study
Disclosure of information about the soundness of enterprises has become increasingly
crucial to global decision-makers, if only because of existing and growing links in the global
economy through international trade and investment. However, it can be observed that financial
disclosure alone can no longer meet all the company's information needs. As a result, disclosing
non-financial information about company activities, using mainly environmental, social, and
sustainability reports, is becoming increasingly important (Raimon et al., 2021). In recent times,
corporate environmental, social and governance (ESG) practices have received considerable
attention in academia and business community (Arif italics, 2020).
Firms are being pressured to improve operational efficiency and financial performance
while facing significant demand from numerous groups of stakeholders to go beyond the
mandated level of ESG activities (Eliwa italics., 2021). The 14.37% raise in ethical/socially
responsible investment (SRI) funds by firms in major financial markets globally, from
US$30.6tn in 2018 to over US$35tn in 2020 (Bloomberg, 2022), confirms stakeholders’ growing
interest to integrate ESG criteria in their business practices. Hence, it is not surprising that the
economic issues alone are no longer enough to make firms remain competitive and sustainable
(Maas and Reniers, 2014). The problems faced by business owners in the wake of the prevailing
COVID-19 pandemic are causing growing uncertainty and a lack of investor confidence, which
can be countered by increasing the quantity, transparency, and quality of disclosures.
However, the developed countries have experienced an increase in the demand for
environmental accounting as a result of disclosure practices and globalization. There are several
laws and regulations enacted for environmental protection (Chavarkar, 2020). Environmental
accounting information disclosure in annual reports of the firms supposed to create more
awareness as regarding the environment (Bhuiyan, et al., 2017, and Ullah, et al., 2013).
Disclosures that contribute to this are critical factors that increase stakeholder and shareholder
confidence (Ellili, 2020). The rise in the popularity of sustainability reporting may be attributed
to the creation of corporate social and environmental reporting. Because of its popularity,
investors have begun to recognize the importance of sujkmiistainability reporting.
 With increased knowledge, investors are more inclined to prefer companies that provide
more powerful sustainability reporting when making investment choices. Furthermore, increased
public knowledge of corporate environmental and social concerns has necessitated corporations
disclosing their efforts and activities on these matters. These information transparency initiatives
address the interests of a wide range of stakeholders, particularly shareholders. Sustainability
reporting has been critical in accounting and reporting literature for many years. This is because
stakeholders need financial and non-financial information to make conscious decisions. Investors
and owners use this information to make investments and other industry choices. Even though
sustainability reporting has grown in importance in recent decades, the plausibility of studies on
how sustainability reporting correlates with firm value remains uncertain and incomplete Dada,
& Onyeogaziri, 2018).
However, whether investing in sustainability reporting improves business value is still
debatable, and the influence of sustainability reporting on firm value is uncertain (Carp,
Păvăloaia, Afrăsinei., & Georgescu, 2019). While there is a large amount of literature
concentrating on the estimation of the cost of equity (for a recent overview, see, for example, Da
et al. (2012)), a little attention has been focused on the cost of debt. It is common practice to
simply use the yield to maturity of the company’s debt securities as an approximation. However,
using the yield to maturity neglects the risk of default, and is, therefore, only a reasonable
approximation when default risk is small. Instead, cost of capital, defined as opportunity costs, is
the required expected return to capital suppliers, as described, for example, in the textbook of
Brealey et al. (2016).
For many years, the central concern was minimizing the negative impacts of human
activities on the environment, or doing less harm. Innovation was mainly driven by the need to
comply with environmental regulations. This changed in the 1990s with the emerging consensus
that, in addition to being accountable to shareholders for profits, responsible companies also
needed to be accountable to society for the social and environmental impacts of their activities.
Thinking evolved further as it became clear that environmental sustainability could also provide
a competitive advantage: efforts to foster sustainability often generate added value for
organizations’ core activities. The case of environmental sustainability in health systems,
however, differs from that in other organizations in at least one crucial aspect – namely, the
trade-offs that are not acceptable in the name of environmental sustainability.
 In most public and private large organizations, short-term trade-offs between certain core
goals (for example, profits or return on investment) and environmental sustainability are possible
in the context of long-term planning and operational management. However, no trade-offs can be
accepted between environmental sustainability and core health systems functions performance.
Here, the emphasis should be placed on win–win solutions whereby environmental sustainability
actions reinforce health system functions. Having look at all of this, the intention of my study
aims to examine the relationship between the cost of debt and ESG disclosure in Nigeria health
care sector.

1.2 Statement of Problem

Environmental pollution has a negative health impact on workers and their performance
on one hand and society on other hand even those who define the units objectives to increase
profits in the short term realise that the society’s image affects its profits and its ability to
generate revenue. Therefore, taking environmental accounts into consideration, especially
environmental costs, will make the accounting profession able to provide more relevant
information to decision makers especially in productivity where the problem lies in the lack of
information resulting in the adoption of improper decisions that contributed to the deterioration
of the state of environment. Another concern is the inability of the traditional accounting system
in industrial companies to clarify the efforts made by them in the field of environmental
protection. Another problem is the failure to disclose environmental costs. These costs will lead
to an irrational depletion of natural resources. Many industrial companies integrate these
environmental costs within the costs industrial.

Mandatory environmental disclosure is the opposite of voluntary environmental

disclosure. According to accounting policy makers, those in charge of the money market and the
preparation of accounting rules and financial reporting standards, this disclosure must be in
accordance with the needs of the interested parties. Also, it must provide the minimum missing
disclosure in case Voluntary environmental disclosure, and works to reduce the asymmetry of
information between management and investors, and the social costs borne by investors for
searching and obtaining information(Al-Azm, 2005). The existence of accounting standards that
require disclosure of environmental costs has helped obligate companies to the necessity of
environmental disclosure of these obligations. This is because the data of the presentation of
information in the financial statements depend on the generally accepted accounting principles
requiring the provision of an appropriate disclosure element in these lists regarding all material
matters. Also, the intended disclosure element here is closely related to the form and content of
the financial statements, the terminology and notes used in them, and the extent of the details
they contain.

Unfortunately, the information that will enable investors to assess all the significant risks
of firms’ activities are missing from the conventional corporate report (Lubber & Moffat, 2010).
Many drivers of value are not accounted for in the conventional corporate report. There have
been increasing concerns that existing system of corporate reporting lack transparency and no
longer provide all the information stakeholders need to assess corporate performance and value.
Numerous studies have highlighted criticisms and limitations of the existing financial reporting
model (Gatimbu & Wabwire, 2016; Feyitimi, 2014; Thiagarajan & Baul, 2014). As the above
literature suggests, in emerging economies characterized by high uncertainty levels and wide
information asymmetries, there is a growing interest regarding the mechanisms that allow firms’
access to better credit terms.
Ghouma, Ben and Yan (2017) further argued that the second advantage of debt financing
is its monitoring role since highly geared companies tend to pay significant attention to debt
market reaction. They justified a preference for debt financing over equity on the ground that the
signalling attributes of debt assist in reducing asymmetry information between companies’
managers and investors which in effect reduces the future cost of financing. Therefore, firms can
maximize shareholders’ wealth via a reduction in the overall cost of capital by using more debt
capital than equity capital while also taken into consideration the risks and return of each of these
financing vehicles.
Some studies find evidence suggesting that institutional investors’ participation plays a
key role in granting better financing access. Another channel through which we conjecture
ESGD affects the cost of financing is related to the risk embedded in the growth opportunities of
firms. Regardless, the ESG effects on the cost of debt present a vital knowledge gap in research.
For example, Dhaliwal et al. (2011) call attention to this area of research. They argue that ESG
practices could affect debtholders differently compared to equity-holders due to their payoff
functions being different. Given the increasing importance attached to ESG practices, a plethora
of studies have evaluated the financial implications of ESG practices (Bacha et al., 2021; Jang et
al., 2019; Ben Saad and Belkacem, 2022; Vurro and Perrini, 2011). Environmental accounting
disclosure are voluntary as a result of non-availability of either local or international standards to
guide disclosure. Companies tend to disclose this information to conform to industry practices,
pressures from environmental activist and advocates, relationship with parent company (Multi-
National corporations), ownership structure of the company, size and level of profitability.
The link between corporate performance and environmental, social governance disclosure
is still a controversial issue which has mix result. Some studies suggest that ESG disclosure is
positively associated with financial performance, Teoh, Pin, Joo & Ling, 2017; Hossain, Islam &
Andrew, 2016; Jiufang & Xiaohua, 2019: Nina, & Cyrielle 2014; Indarawati, Ruhanita & Nor,
2016; argued that companies that make ESG disclosure may employ more efficient method of
production to reduce pollution and other externalities that may result to litigation and as a result
gain competitive advantage. However, Smith, Khadijah & Amiruddin (2017) suggested
otherwise. They argued that environmental reporting involves costs to companies and this
reduces profit. So far it is unclear what impact ESG Reporting has actually had on organisation
strategies, practices and outcomes (Hubbard, 2008).
The result of most researches conducted on Sustainability Reporting and financial
performance are either inconclusive or contradictory, reporting positive or sometimes negative
results. Due to inconsistent result, it is necessary to re-evaluate other important variables that
could determine company performance as well as consider or carefully selected environmental
sensitive firms. In the light of these limitations, this study is therefore set to find out the effect of
environmental social governance. For these reasons, the first aim of this study is to investigate
the relationship between the cost of debt and ESG disclosure in Nigeria health care sector.
Hence, this research study aims to fill this gap regarding the ESG and cost of debt in the health
care sector.
1.3 Research Questions
In pursuance of the main aim and specific objective of the study, the study possesses the research
question to guide the research focus:
i. What is the impact of social disclosure on cost of debt of Listed Healthcare Sector
Companies in Nigeria.
ii. What is the effect of environmental disclosure on cost of debt of Listed Healthcare Sector
Companies in Nigeria.
 iii. What is the influence of corporate governance disclosure on cost of debt of Listed
Healthcare Sector Companies in Nigeria.
1.4 Objectives of the Study
The broad objective of this study is to examine how ESG disclosure affect cost of debt in Nigeria
health care sector. While The specific objectives are to:
i. establish the impact of social disclosure on cost of debt of Listed Healthcare Sector
Companies in Nigeria.
ii. determine the effect of environmental disclosure on cost of debt of Listed Healthcare
Sector Companies in Nigeria.
iii. examine the influence of corporate governance disclosure on cost of debt of Listed
Healthcare Sector Companies in Nigeria.
1.5 Research Hypotheses

Ho1: Social disclosure has no significant impact on cost of debt of Listed Healthcare Sector
Companies in Nigeria.
Ho2: Environmental disclosure has no significant effect cost of debt of Listed Healthcare Sector
Companies in Nigeria.
Ho3: Corporate governance disclosure has no significant influence on cost of debt of Listed
Healthcare Sector Companies in Nigeria.
1.6 Significance of the Study
This study will be of great importance to company because the ESG factors have
financial consequences and can impact: Access to Capital. Resource efficiency cost savings and
productivity. Risk management ESG is a framework for conscious consumerism. It helps
businesses attract investors, build customer loyalty, improve financial performance and make
business operations sustainable to determine if funds are being invested effectively.
It will also help Investors who want to ensure that the companies they're investing in are
engaging in sustainable and ethical business practices. ESG factors give investors a more holistic
view of a company's performance, allowing them to make more sound investment decisions
and see how rate of return required on new investment projects. It will also be useful to
government in ESG incorporates a social value in Government that did not have a solid place
before. It indicates an investment in sustainable, environmental initiatives that can boost
productivity, and an investment in people that can provide more equal opportunities across
Nigeria, therefore helping to level up the economy. Moreover, it will provide useful information
and serve a point of reference for researchers and academic who will intend to investigate further
on corporate citizenship and social performance of in Nigeria.

1.7 Scope of the Study

This study is within the area of ESG Disclosures and cost of debt among the health care
sectors. This study will focus on selected firm listed the Nigeria Exchange Group (NGX)as at
31st December, 2021. This study is going to be covering some selected healthcare firms in
Nigeria within the period of ten years (2017-2021). 2018 was selected for analysis because
Securities and Exchange Commission (SEC) approved Nigerian Stock Exchange’s
Sustainability/ ESG Disclosure in November 2018, for listed companies.

1.8 Operational Definition of Terms

ESG disclosure: ESG disclosure is a form of public reporting by an organization's management
team about its performance across a variety of Environmental, Social, and Governance (ESG)
issues.

Environmental Disclosure: This are form of corporate responsibility to the society as a result of
activities which emerging a negative impact on the environment.

Cost of debt: The cost of debt can refer to the before-tax cost of debt, which is the company’s
cost of debt before taking taxes into account, or the after-tax cost of debt.

Social Disclosure: This is the provision of financial and non- financial information relating to an
organization’s interaction with its physical and social environment.

Corporate Governance: This term relates to the mechanisms and systems put in place within
and without an organization to ensure that the corporate objectives of the entity is pursued, side
by side meeting the expectations of the general stakeholders, as accountable and transparent as
possible

Health care Sector: This are businesses that provide medical services, manufacture medical
equipment or drugs, provide medical insurance or otherwise facilitate the provision of health care
to patients.
 CHAPTER TWO

LITERATURE REVIEW

This chapter discussed the conceptual review of literatures, theoretical reviews of theories and
empirical review of existing literature. The gaps in the literature were discuss thereafter.

2.1. Conceptual Review

This section discussed further on defining the various concepts on ESG disclosure,
environmental disclosure, corporate governance disclosure & cost of debt and the relationship
linking this concept will be addressed.
2.1.1 ESG disclosure
Environmental disclosure is defined as the disclosure that expresses the method or
method by which industrial companies can inform society with its various parties about their
various activities with environmental content. Also, the financial statements or reports attached
to them are an appropriate tool to achieve this (AlMasry, 2011). Ishak (2010) defined
environmental disclosure as an environmental management strategy to communicate with
stakeholders. Disclosures on sustainability might include both numerical and qualitative data
(Schaltegger, 2012). Several standards and suggestions from various organizations concerning
the form and quality of sustainability reporting exist to make sustainability disclosures more
comparable and believable.
Environment implies the state in which we dwell. It entails every physical surrounding on
Earth and object or conditions and circumstances that enclose us. The cost that a firm expended
on natural resources cannot sufficiently be disclosed by traditional accounting. Environmental
accounting plays an important part in availing information about the firm’s accountability as
regards the environment. The understanding of the firm’s part in the economy towards the
welfare and safety of the environment is being revealed through environmental accounting.
Environmental accounting is a subset of accounting that provides numerical data, measures the
use of natural resources, its cost expended by the firm and its impact on the environment. It
provides data regarding the contribution of the firm toward economic welfare and cost expended
on prevention of degraded resources and pollution control (Chavarkar, 2020).
The United Nations established the Global Compact initiative to encourage sustainable
business practices by having major firms commit to and report on 10 sustainability principles.
Global Reporting Initiative (GRI), International Organization for Standardization (ISO) (ISO
14000 and ISO 26000), Sustainability Accounting Standards Board (SASB), Carbon Disclosure
Project (CDP), and Global Framework for Climate Risk Disclosure are just some of the many
initiatives and organizations that have developed guidelines for E&S R. (Overland, 2007; Siew,
Balatbat, & Carmichael, 2013). Since firms utilize such a wide array of frameworks to disclose
their sustainability initiatives, Reddy & Gordon (2010) and others have noted that the form and
content of sustainability reports may vary greatly (Finch, 2005). Environmental, social, and
corporate governance transparency are leading indications of a company's commitment to long-
term development and sustainability, and so stand to benefit both the company and its
stakeholders (Eccles, Ioannou, & Serafeim, 2012). Elkington shows that when companies
consider all three of these criteria together, they increase their chances of successfully
implementing a plan for sustainable growth (1994).
The European Commission demonstrated its commitment to sustainable development in
Europe by presenting the United Nations 2030 Agenda at the 2019 Sustainable Development
Goals Summit. In their analysis of the effects of sustainability disclosure on stock markets,
academicians Caplan, Griswold, and Jarvis concluded that ESG variables had a major bearing on
responsible investment (2013). In 2010, the US Securities and Exchange Commission recognized
j ESG's significance by providing guidelines on the disclosure of climate risk in response to
requests from investors who regard sustainability disclosure as vital to their decision-making.
Ailman et al. (2017) noted the significance of environmental, social, and governance (ESG) data
on investment decisions and argued that the SASB's support for data standards would make it
simpler for businesses to make sustainability disclosures. The potential impact on investment
return and risk has driven the emergence of ESG and has motivated investors to incorporate ESG
considerations into investment decision. In fact, over half of all the publicly traded equities
globally are now signed by the United Nation’s Principles for responsible investment (UNPRI).
Underlying premise is that institutional investors have economic incentives and ESG
incorporation derive both, lower risk and higher returns. (Ho, V., H. 2016).
Mandatory environmental disclosure is the opposite of voluntary environmental
disclosure. According to accounting policy makers, those in charge of the money market and the
preparation of accounting rules and financial reporting standards, this disclosure must be in
accordance with the needs of the interested parties. Also, it must provide the minimum missing
disclosure in case Voluntary environmental disclosure, and works to reduce the asymmetry of
information between management and investors, and the social costs borne by investors for
searching and obtaining information(Al-Azm, 2005). The existence of accounting standards that
require disclosure of environmental costs has helped obligate companies to the necessity of
environmental disclosure of these obligations. This is because the data of the presentation of
information in the financial statements depend on the generally accepted accounting principles
requiring the provision of an appropriate disclosure element in these lists regarding all material
matters. Also, the intended disclosure element here is closely related to the form and content of
the financial statements, the terminology and notes used in them, and the extent of the details
they contain.

2.1.2 Social disclosure

Social disclosure (CSR) reporting refers to a company's systematic disclosure of
information on its social performance. The term social performance is understood in a broad
sense and refers to social, environmental, and governance issues that are typically not covered by
financial performance metrics. Disclosure of information about the soundness of enterprises has
become increasingly crucial to global decision-makers, if only because of existing and growing
links in the global economy through international trade and investment. However, it can be
observed that financial disclosure alone can no longer meet all the company's information needs.
As a result, disclosing non-financial information about company activities, using mainly
environmental, social, and sustainability reports, is becoming increasingly important (Raimo et
al., 2021).
This type of disclosure of Corporate Social Responsibility (CSR) is becoming
increasingly popular among listed companies. Managers responsible for reporting (including
financial reporting) are becoming increasingly aware of the benefits they can gain by doing so.
Growing awareness of the need to address social and environmental issues has led to such
activities being increasingly treated as an investment in a core competency or asset rather than a
constraint or solely a cost source. Companies that take into account the CSR above in their
activity also identified in the literature with ESG (Gillan et al., 2021) (Environmental, Social and
Governance), and at the same time inform their environment about it may expect certain benefits.
These include (Bassen et al., 2011; Burke and Logsdon, 1996; Jędrzejka, 2013; Knox and
Maklan, 2004), improving the corporate image and bolstering confidence in the company,
investment attractiveness, enjoying more excellent employee acquisition opportunities, better
employee loyalty, and job satisfaction, more innovation – taking environmental and social
aspects into account motivates to create new products and streamline processes, lower costs can
result from reduced resource consumption; more effective risk management.
Regarding sustainability and corporate social responsibility (CSR) reporting, Xu et al.
(2019) conducted a study on selected Chinese companies and proved a positive relationship
between CSR disclosure and the cost of debt. Fonseka et al. (2019) studied a sample of Chinese
companies, proving a negative relationship between environmental information and the cost of
debt. Additionally, Eliwa et al. (2019) examined a sample of companies operating in 15
European countries, concluding that the impact of ESG disclosures has a negative relationship
with the cost of debt. Also, Bhuiyan and Nguyen (2019) studied a sample of Australian listed
companies and found a negative impact of ESG disclosures on the cost of debt (Raimo et al.,
2021).
2.1.3 Environmental disclosure
Environmental Disclosure is defined as the disclosure that aims to provide parties
interested in financial statements with additional and optional administrative and financial
information. It also provides the information required by the presentation and disclosure
standard, such as historical information about the company, and the company’s objectives,
whether general, financial, or environmental goals. This disclosure aims to serve investors,
lenders, external auditors, and serve the company’s objectives such as environmental objectives,
marketing objectives, financial objectives, profit rates and liquidity (Mariq, 2009). There is also
recognition of the value of environmental information that is voluntarily disclosed. Some studies
have found that users of financial statements believe that the information is important for making
their decisions and that they look for it in the annual reports of companies. Yet, they place
environmental information after traditional financial information in terms of the order of
importance for their decisions (Deegan, 2002). The researcher believes that environmental
disclosure is still optional in most cases. However, many companies in developed countries took
the initiative to apply environmental laws and legislations and worked to develop their
environmental management and emphasized the placement of environmental reports within the
annual reports at the end of the accounting period.
2.1.4 Corporate Governance Disclosure
Corporate governance can be defined as a set of rules governing the relationship between
shareholders and managers, governments, employees and holders of other internal and external
interests relating to their rights (Muhamad & Rosinta, 2016). Corporate governance is applied to
improve the performance and accountability of the company to optimize shareholder value in the
long term by taking into account the interests of other stakeholders and based on the values of
ethics and laws and regulations in force. The literature that studies the impact on the cost of debt
of corporate disclosures cover different types of disclosure–namely: voluntary, financial, CSR,
intellectual capital, integrated reporting, and more recently ESG. Usually in the context of
developed countries, most studies that focus on voluntary disclosure find that the cost of firms’
debt decreases with more disclosure. Hence, evidence suggests a negative relationship between
corporate transparency and the cost of debt financing.
The need to promote governance has increased since 2009 global economic recession in
Nigeria (Adegbite &Nakajima, 2011) the investment climate in Nigeria needs to be reassuring,
especially to foreign investors, if Nigeria is to tap its full investment potential. Corporate
governance disclosure facilitates and contributes to economic development and long-term
sustainability (Armstrong, 2003) thus improves a firm reputation and how it’s perceived by
investors and stakeholders. Corporate governance disclosure needs to be sustained through
constant review of the regulatory system Electronic in Nigeria
Corporate disclosure has been considered as an essential practice to the economic
development and growth of emerging economies (Al-Zarouni et al., 2015) The CG codes
available in Africa are influenced by OECD principles of CG (1999, 2004), the Commonwealth
Association for Corporate governance CAGG (1999) and the King Reports on CG in South
Africa (1994, 2002). Nigeria is purposely chosen for this study because of its size amongst the
Sub Saharan African countries and its massive influence on economic and political roles
particularly in the Economic Community of West African States (ECOWAS) and the African
Union. According to Adelopo (2011), the understanding of disclosure practice amongst listed
companies in Nigeria is important for reporting and accountability
However, some studies challenge the inverse relationship between disclosure and the cost
of debt. Considering the different business contexts, these mixed results illustrate that the
relation between transparency and the cost of debt is more complex than what the studies in
developed countries suggest. A second strand of the literature analyzes the association between
financial disclosure and the cost of debt. These results tend to confirm previous findings,
indicating that greater financial disclosure generates a lower cost of debt. Behind this
relationship is the argument that a greater disclosure reduces lenders’ and underwriters´
perception of the default risk of the disclosing firm. As a result, these firms face a lower risk
premium in credit operations. Firms with high disclosure quality ratings from analysts enjoy a
lower cost of debt, especially in situations where there is greater uncertainty about the firm.
Similarly, find that financial reporting quality in terms of its readability and content has a central
role in assessing firm performance and ameliorating information asymmetries between lenders
and firms.
2.1.5 ESG Disclosure and Cost of Debt
The cost of debt reflects how much money must be spent by a company since using a
loan. In another definition, the cost of debt is the rate that must be received from investment to
achieve the rate of return for the debtholder/creditor (Martin, 2014). Before taxes, the cost of
debt comes from dividing the paid interest expense by the total interest-bearing debt in one
accounting period. However, companies that use part of their funds from debt will be liable to
pay interest. Therefore, interest is a form of burden for the company. With this interest expense,
the amount of income tax payments will reduce. Therefore, the calculated cost of capital must
also be after-tax. The cost of this debt needs to be adjusted for tax (Sutrisno, 2009).
The debt-to-equity ratio can see the proportion of the company's debt or external parties
and the company's equity. Sources of funding within the company can be obtained from internal
or external companies. The internal funds come from retained earnings, and the external funds
come from debt or the issuance of new shares. Companies that use debt are responsible for the
interest and principal costs of the loan. The use of debt (external financing) has a large enough
risk of not paying off debt. Thus, the use of debt needs to pay attention to the company's ability
to generate profits. Dirman (2020) asserts that the debt-to-equity ratio has a positive impact on
the cost of debt. However, using the yield to maturity neglects the risk of default, and is,
therefore, only a reasonable approximation when default risk is small. Instead, cost of capital,
defined as opportunity costs, is the required expected return to capital suppliers, as described, for
example, in the textbook of Brealey et al. (2016). While the cost of equity is the expected return
to stockholders, the cost of debt is the expected return to bondholders. When the debt is risky,
meaning, when there is a non-zero probability of default, the expected return is not identical to
the yield to maturity of corporate debt securities, because the risk of possible loss in the event of
a default lowers the expected return.
Dirman (2020) found that the debt-to-equity ratio positively impacts the cost of debt.
However, Septian and Panggabean (2017) found that the debt-to-equity ratio does not affect the
cost of debt. Research conducted by Fuandy (2018) found that the interest coverage ratio harms
the cost of debt. Meanwhile, Safdar and Yan (2016) found that the interest coverage ratio has no
impact on the cost of debt. Research conducted by Sherly and Fitria (2019) found that return on
the asset harms the cost of debt, while Dirman (2020) found that return on the asset does not
affect the cost of debt.
2.2 Theoretical Review
2.2.1 Stakeholder Theory
Stakeholder theory propounded by Edward Freeman in 1948. The construct of this study
was based on theory of stakeholders because is a business ethics and management framework
that considers the interests of all parties involved in corporate decisions. Stakeholders of the
Organizational Mind, written by Ian Mitroff and published in San Francisco in 1983, provides
the earliest account of this phenomenon (Wikipedia, 2017). Whoever stands to benefit or suffer
from the actions and choices of a company is considered a stakeholder. Stakeholder theory, as
articulated by Argandona (1998), asserts that corporations are responsible to a wide variety of
constituencies in addition to their stockholders. These constituencies include debtors, buyers,
sellers, workers, citizens, government, the environment, future generations, and so on. The
importance of integrated sustainability reporting in improving communication between
businesses and the communities in which they operate was highlighted by King and Lenox
(2001). When a company fails to consider the needs of its stakeholders, it risks damaging its
reputation and, in turn, its bottom line. In conclusion, stakeholder theory recognizes businesses'
place in the social system and directs attention to the many stakeholder groups (Ratanajongkol,
Davey & Low, 2006). Stakeholder theory analyzes how businesses recognise and respond to the
needs and interests of the communities in which they operate.
According to stakeholder theory, a business's activities influence the firm's values and
other stakeholders. As a result, a firm's activities and decisions should be based on the
requirements of all stakeholders. When these groups' interests are considered, risk estimate
improves, providing firm value for investors and other stakeholders (Martnez-Ferrero & Frias-
Aceituno, 2013). Consequently, sustainability reporting contributes significantly to a company's
internal and external bodies. Furthermore, when a company's board of directors implements
social responsibility policies, it may get long-term support from its stakeholders, which can
favorably affect its long-term worth.
2.2.2 Legitimacy theory
The theory was propounded by Dowling and Pfeffer in 1975. On legitimacy theory, firms
continually aim to ensure that they are perceived as operating within the bounds and norms of
their societies (Deegan and Unerman, 2011). So, firms attempt to ensure that their activities are
perceived by externals as being legitimate. Therefore, firms should adopt practices that are able
to influence societal appraisal to increase their legitimacy such as social and environmental
practices including real activities and/or disclosure (DiMaggio and Powell, 1983; Deephouse,
1996; Suchman, 1995). In this regard, Neu et al. (1998), who use an impression management
lens that can be linked to legitimacy theory, suggest that financial stakeholders such as banks are
the most important stakeholder to the firms and that disclosures will be primarily tailored
towards them in order to more effectively meet their needs.
It is argued in the literature that society progressively assumes that firms will “... make
outlays to repair or prevent damage to the physical environment, to ensure the health and safety
of consumers, employees, and those who reside in the communities where products are
manufactured and wastes are dumped ...” (Tinker and Neimark, 1987, p. 84). Therefore, firms
with a poor ESG performance might find it difficult to get the necessary support and resources to
continue working in a community that values ESG practices, e.g., higher cost of debt.
Legitimacy theory emphasises that firms should consider the rights of the public at large, not
merely those of its investors. Failure to comply with societal expectations might lead to sanctions
being imposed by society in the form of legal restrictions imposed on a firm’s operations, or
provide the firm with limited resources (e.g., higher cost of debt capital) (Deegan and Unerman,
2011).
The idea underlying the legitimacy theory has been that corporations are parties to a
social compact agreement with the community in which it operates. Because these standards are
not permanent and vary over time, the organization must adhere to society's ethics and morals. It
is claimed that under this relationship, the society has the authority to withdraw the
organization's contract if the organization works in violation of the society's ethics. It is also
regarded that the organization owes explanations to society when they seem to veer from typical
to aberrant. When an organization cannot explain its activities, the community may, in a sense,
rescind its contract with the organization. As a result, businesses must adapt to social changes, as
the community′s demands vary over time (Mansell, 2013).
Firms are thought to have hidden societal duties. Firms create sustainability reports to
show conformity with standards due to the requirement to act as society expects. According to
Cho and Patten (2007), sustainability disclosure may be utilized as a legitimizing strategy. The
legitimacy process necessitates that companies select indicators with standard rules or other
criteria to gauge their social and environmental performance to communicate with society about
the firm's adherent status (Deegan & Blomquist, 2006). Businesses that provide clear and
acceptable sustainability reports demonstrate their commitment to social responsibility and
compliance with sound business practices. This can help stakeholders perceive the firm's socially
responsible performance and transparency. As a result, a high degree of stakeholder perception
and support may increase the value of firms.
2.3 Empirical Review
Using a coding index method, Khlif, Guidara, and Souissi (2015) analyze a sample of
168 firm-year observations from 2004-2009 in South Africa and Morocco to determine the level
of social and environmental disclosure in annual reports and the correlation between this
disclosure and financial performance. They show that social and environmental disclosure
significantly improves a company's financial success.
According to research conducted by Ruparelia and Njuguna (2016). When broken down
into subsets of the financial market, the findings revealed the existence of a statistically
significant link between board compensation and dividend yield in the banking industry. Return
on Assets, Return on Equity, and Earnings per Share were not disclosed. Board compensation
was shown to have a statistically significant association with Return on Assets (ROA) solely in
the insurance industry, while no such correlation was found in the investment industry.
According to research by Sila, Gonzalez, and Hagendorff (2016), companies with more women
on their boards of directors had lower equity risk. Using Structural Equation Modeling (SEM),
Haryono and Paminto (2015) discover that good company governance has a considerable
favorable impact on financial results. Aggarwal (2013) uses the Indian setting to empirically
investigate whether or not corporate governance and corporate profitability are linked. They
conclude that the governance rating of a business has a substantial influence on return on equity
(ROE), but not on the other three profitability indicators
Hasan et al, (2016) investigated the mediating role of total factor productivity in the link
between corporate social responsibility and increased shareholder value creation, illuminating
the underlying processes by which CSR leads to higher shareholder value creation. Researchers
found that good corporate citizenship significantly boosted Tobin's Q. There is a strong positive
correlation between productivity and performance. The mediation study further demonstrates
that total factor production has a crucial role in mediating the CSPCFP connection.
Nnamani et al. (2017) conducted the latest research in this area by analyzing data from
the Nigerian brewery sector between 2010 and 2014. Sustainability reporting was evaluated
based on the ratio of social responsibility expenses to total revenues (TPCT), while financial
success was represented by the Return on Assets and Return on Equity metrics. Total equity to
total asset (TETA) ratio was shown to have no statistically significant impact on ROA (ROA).
Further, the ratio of total personnel costs to turnover (TPCT) shows little correlation with ROA
(ROA).
Tuomas (2017) investigated how corporate responsibility influence firm’s profitability,
valuation and cost of debt. ESG impact is tested by using pooled OLS regressions for 200
publicly listed firms in Nordic countries. Data is obtained from Thomson Reuters’ database and
covers period from 2002 to 2016. Regression models test the overall impact of ESG as well as
takes deeper focus in the best and worst ESG performers by using dummy variables Empirical
findings of this research indicate that ESG impact is significant and positive in firm’s market
valuation. The results suggest that equity markets reward those firms with very high ESG
performance and ignore those with very low ESG performance. Unlike previous literature and
findings suggest, cost of debt is not lower for those with higher responsibility performance.
Lastly, profitability seems to be positively associated with ESG rating as far as return on asset is
used.
Cheng et al. (2017) examine the various environmental and governance behavior
significant factors affecting cost of capital in United States. The study shows that high
environmental and governance performances are individually significant factors in reducing cost
of debt. On the other hand, environmental concerns increase cost of debt, while governance
concerns seem not to have impact on cost of debt. The results reveal that environmental aspect
has explanatory power in both scenarios, while only high governance concern has impact on cost
of debt.
Riadh et al (2018) investigate the relationship between corporate debt-like compensation
and the value of excess cash holdings. The environmental, social and governance (ESG)
disclosure score provided by Bloomberg is used as a proxy for the extent of corporate social
responsibility (CSR). The empirical analysis is based on a sample of 379 firms that made up the
Standard & Poor’s 500 Index over the period 2010-2015. In order to take into account, the
endogeneity problem between board gender diversity and ESG disclosure, a fixed effect model
with lagged board variables is used. Two main results arise from this study. First, no significant
relationship is found between board gender diversity and ESG disclosure. Second, the evidence
also partially confirms critical mass theory, as below three female directors the relationship
between board gender diversity and ESG disclosure is not statistically significant. However,
beyond that, no significant relationship was found
Eliwa, Aboud and Saleh (2019) examined whether lending institutions reward firms in 15
EU countries for their environmental, social and governance (ESG) performance and disclosure
in terms of lowering their cost of debt capital. Our study distinguishes between ESG
performance that is used to indicate an effective commitment to ESG, and ESG disclosure that
represents an effort to construct an image of commitment designed to positively influence
stakeholders’ perceptions. Supporting a version of legitimacy theory, we find that lending
institutions value both ESG performance and disclosure and integrate ESG information in their
credit decisions – in that firms with stronger ESG performance have a lower cost of debt, and
ESG disclosure has an equal impact on the cost of debt as ESG performance. Although these
findings suggest that the market (in context) can engender more desirable social outcomes by
rewarding ESG practices, it fails to distinguish between ESG performance and disclosure (which
may be contrasted as the more substantive and the more symbolic). Moreover, our results also
reflect upon the importance of the role that civil society and the state play in addressing and
exploring the limitations of free-market regimes. Specifically, we provide evidence that the
impact of ESG performance and disclosure on the cost of debt is more dominant in the
stakeholder-oriented countries (where the community is more prevalent).
 Aluwong and Fodio (2019) examined the influence of corporate attributes on
environmental disclosure by oil companies in Nigeria. The study uses secondary data collected
from the annual reports and accounts of 9 randomly selected oil companies for the period 2011 to
2017. The study analysed the data using the logistic regression technique. The study finds that
corporate attributes significantly affect the environmental accounting disclosure by oil
companies in Nigeria. Based on the findings, the study concludes financial leverage has a
significant positive effect on environmental accounting disclosure by oil companies in Nigeria.
Second, profitability has a significant positive effect on environmental accounting disclosure by
oil companies in Nigeria. Third, the study also find that firm size has a significant positive effect
on environmental accounting disclosure. Fourth, the study finds a positive but insignificant effect
of auditor types on the environmental accounting disclosure by oil companies in Nigeria. The
study recommends that the regulators of the oil companies in Nigeria should encourage the use
of more debts in the oil companies’ capital structure, which will make them disclose more
information about the environment based on the close monitoring and demand by the debt
holders.
Christensen, Luzi and Christian (2019) examine an economic analysis of the determinants
and consequences of corporate social responsibility (CSR) and sustainability reporting. To frame
our analysis, we consider a widespread mandatory adoption of CSR reporting standards in the
United States. The study focuses on the economic effects of standards for disclosure and
reporting, not on the effects of CSR activities and policies themselves. It draws on an extensive
review of the relevant academic (CSR and non-CSR) literatures in accounting, economics,
finance, and management. Based on a discussion of the fundamental economic forces at play and
the key features and determinants of (voluntary) CSR reporting, we derive and evaluate possible
economic consequences, including capital-market effects for select stakeholders as well as
potential firm responses and real effects in firm behavior. We also highlight issues related to the
implementation and enforcement of CSR reporting standards. Our analysis yields a number of
insights that are relevant to the current debate on CSR and sustainability reporting and provides
scholars with avenues for future research.
Derry and Herawati (2021) examined examine the relationship between ESG with
company performance and institutional ownership on BUKU 3, BUKU 4 and Foreign Bank..
This study used information from Sustainability Report and Annual Report published by each
company during period of 2016 to 2019. The sampling method used in this study was purposive
sampling, with the total samples in this study were 37 samples. This study conducted in 2
research model. First model, the independent variables are ESG performance on the company’s
performance (ROA) and institutional ownership (foreign, private, local government/regional-
owned enterprise, and government/state owned enterprise) as moderating variable. The second
model, the independent variable is ownership on ESG performance as dependent variable. The
analysis used in this study are multiple regression analysis and moderated regression analysis
using the SPSS program. The results showed on the first model showed that, governance
performance negatively influence company performance , environmental performance positively
influence company performance, social performance negatively influence company performance,
private ownership is not moderate the influence between SR Disclosure and company
performance, foreign ownership Is not moderate the influence between SR Disclosure and
company performance, local government ownership is not moderate the influence between SR
disclosure and company performance, and government ownership moderate the influence
between SR Disclosure and company performance. Meanwhile the second model showed that
private ownership negatively influence SR Disclosure, foreign ownership positively influence
SR disclosure, local government ownership negatively influence SR disclosure, and government
ownership positively influence SR Disclosure.
Wira and Suwinto (2021) examined the impact of factors that may affect the cost of debt
in the Indonesian manufacturing industry. This study is a quantitative research that uses multiple
regression as statistical analysis to test the hypotheses by using E-views 10 as a tool. The data
population is manufacturing firms in Indonesia and samples are manufacturing firms listed on
Indonesia Stock Exchange for 2015-2019. The results show that institutional ownership, debt to
equity ratio, and interest coverage ratio impact the cost of debt. The implication is the
institutional owners hold the majority of ownership thus the policy of the company is mostly
decided by institutional ownership. This also explains that the creditors consider the direct
aspects related to debt, in this study are a debt to equity ratio and interest coverage ratio. While
managerial ownership, firm size, and return on assets do not impact the cost of debt. The small
proportion of managerial ownership makes the most of the company’s decisions are not based on
the managerial owners.
 Derry and Vinola (2021) examine the effect of sustainable finance disclosure on banking
sector in Indonesia, specifically to examine the relationship between ESG with company
performance and institutional ownership on BUKU 3, BUKU 4 and Foreign Bank. This study
used information from Sustainability Report and Annual Report published by each company
during period of 2016 to 2019. The sampling method used in this study was purposive sampling,
with the total samples in this study were 37 samples. This study conducted in 2 research model.
First model, the independent variables are ESG performance on the company’s performance
(ROA) and institutional ownership (foreign, private, local government/regional-owned
enterprise, and government/state owned enterprise) as moderating variable. The second model,
the independent variable is ownership on ESG performance as dependent variable. The analysis
used in this study are multiple regression analysis and moderated regression analysis using the
SPSS program. The results showed on the first model showed that, governance performance
negatively influence company performance , environmental performance positively influence
company performance, social performance negatively influence company performance, private
ownership is not moderate the influence between SR Disclosure and company performance,
foreign ownership is not moderate the influence between SR Disclosure and company
performance, local government ownership is not moderate the influence between SR disclosure
and company performance, and government ownership moderate the influence between SR
Disclosure and company performance
Ayeni, Olaniyan and Adebayo (2022) investigated the effect of sustainability disclosure
on firms value of listed oil and gas companies in Nigeria; it specifically examined the effect of
social sustainability disclosure, environmental sustainability disclosure, economic sustainability
disclosure as well as corporate governance sustainability disclosure on market share of listed oil
and gas companies in Nigeria The study adopted an ex-post-facto research design and secondary
data was gathered to analyze the relationship between the variables. The population of the study
consisted on twelve oil and gas companies listed on the Nigerian Exchange Group as at 5th
March, 2021; however; only eight (8) samples were selected from the population. The data was
collected from the annual audited financial reports of the eight (8) oil and gas companies
sampled for the investigation for the periods 2000-2020. Panel data was used which consists of
760 observations analyzed using multiple regression model. Robust regression model was used
to test the effect of cultural diversity and other environmental factors. The Hausman test result
revealed that social sustainability disclosure has positive and significant effect on market share
with coefficient of 0.017 which is significant at 5% (p=0.000), economic sustainability
disclosure has positive and significant effect on market share with coefficient of 0.0801 which is
significant at 5% (p=0.049) ,environmental sustainability disclosure has positive and significant
effect of 0.00031 which is significant at 5% (p=0.038)while corporate governance sustainability
disclosure has negative and insignificant effect on market share with coefficient of -1.395with
(p=0.0540)at 5% level of significance. The study therefore, concluded that sustainability
disclosure have strong statistical relationship with the firm value of the selected oil and gas
companies in Nigeria.
Abdulkadri and Saheed (2022) examined the impact of sustainability implementation and
disclosures on firm value remains mixed. As a result, the focus of this study is primarily on the
impact of sustainability reporting on the value relevance of firms in developing countries. This
paper draws on arguments from various theoretical frameworks: stakeholders' theory and
legitimacy theory. A systematic approach was adopted in this study to form the basis for the
study's conclusion and recommendations. The results of the existing evaluated literature revealed
that the influence of sustainability reporting on business value was contradictory.
Christopher and Joakim (2022) examine the disclosure of ESG performance affect the
cost of capital, segregated into the cost of equity and cost of debt to find the appreciation of two
distinct providers of the capital – the shareholders and debt holders. Using a large global panel
dataset from 70 countries, this study intends to provide a better understanding on how the
increasing discussion of sustainability have affected globally the cost of capital for the firms. We
retrieve an unbalanced dataset of 53,831 firm-year observations from 3,511 firms during the
period of 2005-2020 collected from the Thomson Reuters database Eikon. Our results indicate
that equity providers generally penalize the firms disclosing higher ESG performance by
demanding a higher cost of equity.
Alabi and Issa (2022) examine corporate disclosure of sustainability reporting and value
relevance in developing countries - a review of literature. This study is primarily on the impact
of sustainability reporting on the value relevance of firms in developing countries. This paper
draws on arguments from various theoretical frameworks: stakeholders' theory and legitimacy
theory. A systematic approach was adopted in this study to form the basis for the study's
conclusion and recommendations. The results of the existing evaluated literature revealed that
the influence of sustainability reporting on business value was contradictory. Paper adds to the
field by providing crucial insights into the influence of sustainability reporting on company value
using samples from developing countries.
Latvala (2022) investigate ESG Practices and Cost of Debt: The Moderating Role of
Board Gender Diversity. This study investigates the relationship between ESG points and debt
costs in listed companies in Nordic countries. Moreover, the study tests the impact of
environmental, social and governance individually on the cost of debt. The relationship between
ESG and debt cost is tested using OLS regression. The study uses secondary data from the
Thomson Reuters database and contains ESG and financial data from listed companies in
Denmark, Finland, and Sweden from 2006 to 2020. All firms lacking ESG data, as well as
financial companies, were removed from the data. The final dataset included data from 270
companies from 17 different fields. The data is tested using four different regression models, two
of which test the relationship between ESG and debt costs. The other two regression models test
women's participation in government and its moderating effect on the ratio of ESG to debt costs.
Findings of this study show a significant negative relationship between ESG and debt costs.
Based on the results, companies can benefit from a high ESG score in terms of debt costs.
However, compared to previous studies on the individual dimensions of the ESG, only the social
dimension showed a significant negative impact on the cost of debt. In addition, this study found
that firms with female board members have a more substantial impact on the negative
relationship between ESG and debt costs. In addition, the results of this study support the theory
of critical mass on the boards of Nordic companies
Zhiyang et al (2022) examine stakeholders and ESG disclosure strategies adoption: The
role of goals compatibility and resources dependence. The study identify the factors and
mechanisms of ESG disclosure strategy adoption in context of stakeholders. Using new
institutional theory (NIT) and resource dependence theory (RDT), we suggest that goals
compatibility and resources dependence are the 2 critical factors that affect a corporation’s ESG
disclosure strategy adoption. Accordingly, we construct a framework of corporations’ ESG
disclosure strategies adoption. We address the gaps in understanding of ESG disclosure
strategies adoption of corporations, expand NIT and RDT, and provide rich practical guidance to
promote the healthy development of ESG disclosure strategies
 Carnini et al (2022) examine ESG disclosure influence firm performance. The study aims
to analyze the impact of the environmental, social, and governance (ESG) disclosure on the firm
performance, given the stakeholders’ increasing attention to the firm’s ESG practices. the paper
focuses on the Italian situation where the Legislative Decree 254/2016 implemented the
European Directive and forced the largest firms (those with more than 500 employees) to
disclose comprehensive information about their social and environmental activities starting from
2017. By applying a panel regression analysis, using a sample of the largest Italian listed
companies, and considering a time span of 10 years (from 2011 to 2020). The study finds that
there is a positive relationship between environmental, social, and governance disclosure and
firm performance, measured by EBIT.
Adebayo and Oyewole (2022) examined how environmental accounting disclosure
influences the market value of listed non-financial firms in Nigeria between 2012 and 2020. The
research design adopted is the longitudinal design. A total population of one hundred and twelve
(112) listed non-financial firms was identified. A purposive sampling was used to generate a
sample of seventy-two (72) listed non-financial firms sourced from firms’ annual reports. The
dependent variable is the market value measured using earnings per share (EPS). The
independent variable is environmental accounting measured by the index of environmental
disclosure constructed using a content analysis; eight themes of the Global Reporting Initiatives
(GRI). The study employed panel feasible generalized least square regression technique for data
analyses. The outcomes revealed that environmental disclosure influence earning per share as
well as share price positively and significantly. Hence, this study found robust proof which
suggests that environmental disclosure significantly influence market value of listed nonfinancial
firms in Nigeria. The implication is that non-financial firms in Nigeria are yet to show much
concern about the physical environment in which they operate; in terms of adherence to the
environmental laws and standards, process and product related issues including those related to
recycling, packaging, waste, pollution emissions and effluent discharges as well as provision of
sustainability and other environmental related information.
AlHiyari et al (2022) examine whether environmental, social and governance (ESG)
performance is positively associated with firm investment efficiency (IE) in emerging
economies. It also examines whether board cultural diversity can moderate the ESG–IE
relationship. The study uses a cross-country sample of listed firms located in seven emerging
countries over the 2011–2019 period. The authors use a fixed effect panel regression to
empirically test the hypotheses. The authors also use a lagged model and a Heckman’s (1979)
two-stage procedure to mitigate potential endogeneity issues. In addition, a two-stage least
squares regression analysis was done as an additional robustness check. This study finds that
firms with stronger ESG performance have a higher investment efficiency. Interestingly, this
study finds that board cultural diversity negatively moderates the impact of ESG performance on
IE for firms operating in settings prone to overinvestment. This result suggests that ESG
performance plays a less important role in mitigating managers’ tendencies to overinvest when
corporate boards have more foreign directors. However, the authors do not find such evidence in
firms prone to underinvestment. These findings hold after using an alternative measure of IE and
controlling for endogeneity concerns.
Elsa and Joonsung (2022) examines the effects of environmental, social, and governance
(ESG) disclosure on investment efficiency, using the adoption of Directive 2014/95/EU as a
quasi-natural shock on disclosure quality. A significant and robust reduction of underinvestment
for U.S. firms exposed to the Directive. Investment efficiency gains are strongest for firms with
ex-ante lower ESG disclosure levels, that are financially constrained, and for firms with more
entrenched managers. Underinvesting firms exposed to the shock raise more debt ex-post and the
additional debt is used to reduce underinvestment. These results suggest that non-financial
disclosure can play a role in mitigating information asymmetry in debt markets.
Nwaigwe et al (2022) examine the effect of the extent and quality of sustainability

disclosure on market value of firms. To achieve the study’s objectives, 31 relevant sustainability

performance indicator aspects were analyzed for the 39 companies drawn from 9 sectors for the

period 2010–2019. This results in 390 firm-year observations and 12,090 data points used to

calculate unweighted sustainability extent and quality indices. Findings from regression analysis

suggest a positive non-significant association between extent of sustainability disclosure and

firm market value. Quality of sustainability disclosure was found to be negatively related to

market value. Variations were also found in the value effect of the extent and quality of

sustainability disclosure across the economic, social and environmental dimensions of

sustainability. Joining two separate streams of research—extent and quality of sustainability

disclosure—the study offers new and insightful evidence on the value relevance of the duo from

a developing clime

2.4 Gap in Literature

Despite the fact that some studies have been carried out on the link between

environmental, social governance disclosure and cost of debt. Still a controversial issue, which

has mix result. Some studies suggest that ESG disclosure is positively associated with financial

performance, to complement previous research done, this study addresses questions on how the

overall ESG performance is related to ESG indicators allow capturing and measuring the extra-

financial performance in all three dimensions of ESG issues (Bassen & Kovacs, 2018). Thus, we

investigate if firms, which are putting effort into having high ESG indicators, are performing

better financially. Contrary to previous studies in this field, this paper takes all three aspects

(environmental, social, and governance), equally weighted, into consideration. Thereby,

corporate financial performance is analyzed using return on asset on the one hand through and on

the other hand putting together as ESG. ESG research is heavily weighted toward exploring

relationships with financial performance. Therefore, it postures a company's overall financial

health and its ability to generate long-term shareholder value through its use of best management

practices

CHAPTER THREE
 METHODOLOGY

This chapter presents the research design, source of data, population of the study, sample
size and sampling technique, model specification, measurement of variables as well as the data
analysis technique.

3.1 Research Design

This study adopted ex-post facto research design. The choice of this research design is based on
the premise that the study involved the use of already available data that cannot be manipulated
from the period between 2017 -2021. The study collected data from published annual reports of
selected firms and factbooks published by the Nigeria Exchange Group.

3.2 Sources of Data

Data were collected through secondary sources. The data were sourced from the annual
reports of the sampled healthcare firms in the Nigeria Exchange Group (NGX) fact book for the
period 2017-2021 covered in the study. This source was used in order to obtain quantitative
information on the variables that exist in the model developed in this study.

3.3 Population of the Study

This study's population comprises all the (7) health care sectors listed on the Nigeria
Exchange Group as of 31st December 2021.

3.4 Sample size and Sampling Technique

A sample size of six (6) listed healthcare sectors was selected using a purposive
sampling technique. These seven listed firms’ companies selected are based on the number of
firms listed companies in Nigeria as of 31st, December 2021.

3.5 Model Specification

This research work aims at examining examine how ESG disclosure affects the cost of debt in
Nigeria’s healthcare sector. The cost of debt will be used as a dependent variable and ESG
rating as the independent variable. For the first model, which aims to answer all the hypotheses,
the regression will first be performed only with control variables, FSIZE, IntCov, LEV, ROA,
and BSIZE. After this, the overall ESG scores are included. Furthermore, year and industry-
fixed effects will be used in all models. The econometric model used in the study was adapted
 from the study of Sofia, (2022) who examined ESG Practices and Cost of Debt: The Moderating
Role of Board Gender Diversity. The following two models are constructed

𝐶𝑜𝐷𝑖𝑡 = 𝛼 + 𝛽1𝐸𝑆𝐺𝑖𝑡 + 𝛽4𝐿𝐸𝑉𝑖𝑡 + 𝛽5𝑅𝑂𝐴𝑖𝑡 ………….(1)

𝐶𝑜𝐷𝑖𝑡 = 𝛼+𝛽1𝐸𝑛𝑣𝑖𝑡 + 𝛽2 𝑠𝑜𝑐𝑖𝑡 + 𝛽3𝑔𝑜𝑣𝑖𝑡 + 𝛽5𝐿𝐸𝑉𝑖𝑡 + 𝛽6𝑅𝑂𝐴𝑖𝑡+ 𝑣𝑖𝑡…………(2)

3.6 Measurement of variables

S/N Variable Description Measurement Source of data

Dependent
1 Cost of Debt The overall rate being paid Measure as the ratio of a Oikonomou et
by a company to use these firm's interest expense to al. (2014) and
types of debt financing its average debt Eliwa et al.
(2021)
Independent
2 ESG The ESG rating is based on Environmental information Studenmund,
disclosure three key dimensions, content ratio of scoring 2017 and Eliwa
environmental, social, and full marks et al. (2021)
governance
3 Social Shows how capable the firm measure CSR activities, Tuomas, 2017
disclosure is in managing its relations and this index is developed and Eliwa et al.
(SOC) with its workforce, based on Global Reporting (2021)
stakeholders, and the society Initiatives
in which it operates
4 Environmenta Shows the contents of the Measures the firm's Oikonomou et
l disclosure disclosures and the operation in relation to its al., 2014; Eliwa
(ENV) relationship between the impact on natural et al., 2021
disclosure contents and the surroundings and
firms' environmental ecosystems
performance is tested.
5 Corporate corporate governance Measures how effectively Studenmund,
Governance disclosure determines the a firm's governance 2017 and Eliwa
disclosure level of executive pay structures are capable of et al. (2021)
(CGD) (including CEOs, CFOs, ensuring that shareholders'
and all executive directors best interests are met in
the long run
Control
variables
6 Leverage look at how much capital measured by dividing total Jung et al.,
(LEV) comes in the form of debt debt by total assets in year 2016; Eliwa et
(loans) or assesses the t al., 2021
ability of a company to
meet its financial
obligations
7 return on This is a profitability ratio measured as the "net Oikonomou et
assets (ROA) that provides how much income before al., 2014; Eliwa
profit a company is able to extraordinary items et al., 2021
generate from its assets deflated by total assets
Source: Researcher’s Computation 2023

3.7 Data Analysis Technique

To analyze the data gathered for the study, descriptive statistics and inferential statistics
will be used. For the inferential statistics, panel data analysis was employed to estimate the
causal effect relationship between the dependent and independent variables. Descriptive
statistics like mean, standard deviation, minimum and maximum value, skewness and kurtosis,
and panel regression analysis.
 CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS

This chapter of the study report the outcome of the data analysis carried out to achieve the
objective of the study. The data were collected from the NSE Factbook, annual reports and
accounts of surveyed firms.

4.1 Descriptive Statistics

The success of the study requires a strong understanding of variable characteristics. To

comprehend the variable distribution, the researchers used descriptive statistics such as mean,
median, minimum, maximum, standard deviation, skewness, Kurtosis, and Jaque-Bera, statistics.
Table 4.1 reports the descriptive statistics of the variables. The variable of cost of debt reports
the mean of 4.6726 and median of 3.2900. The mean of cost of debt (CoD) is greater than its
median, which implies that the variable is positively skewed. The maximum value reported is
16.1500 and the minimum value reported is 0. The mean value reported by environmental
disclosures (ENV) is 0.1303 and the median value is 0. The mean value is greater than its median
indicating that the variable is positively skewed. The maximum value reported by this variable is
1 and the minimum value is 0. This indicate that some firms have failed to make environmental
disclosures in their annual report. The mean value reported by social disclosure (SOC) is 0.3352
and a median of 0.3600. It reported a maximum value of 0.64 and a least value of 0. This implies
that some firms failed to make disclosures about their social responsibility.

The mean value reported by governance disclosures (GOV) is 0.4366 and a median of 0.5
indicating that the variable is negatively skewed. It reported a maximum value of 0.7 and a
minimum value of 0. This indicate that some firms had failed to disclose their governance
practices in the annual report. The value of leverage reported a value of 55.9138 and a median of
56.3. It reported a maximum value of 106.94 and a least value of 23.6. The mean value reported
by return on asset is -2.9097 and a median of 3.3. The median value of the return on asset is
higher than its mean value indicating that the variable is negatively skewed. The variable also
reported a maximum value of 11.24 and a least value of -35.2. The by the minimum value
reported is an indication that some firms had reported a net loss over the period.
The Jarque bera statistics report the normality condition of the variable. It tests whether the
variables are normally distributed or not. For a variable to be normally distributed, the p-value of
its Jarque-Bera statistic must be greater than 0.05. Table 4.1 shows that all the variable reported a
p-value greater than 0.05 apart from environmental disclosures, which implies that they are
normally distributed.

Table 4.1: Descriptive Statistics

COD ENV SOC GOV LEV ROA

Mean 4.6762 0.1303 0.3352 0.4366 55.9138 -2.9097
Median 3.2900 0.0000 0.3600 0.5000 56.3100 3.3000
Maximum 16.1500 1.0000 0.6400 0.7100 106.9400 11.2400
Minimum 0.0000 0.0000 0.0000 0.0000 23.2600 -35.2100
Std. Dev. 4.9764 0.2499 0.1648 0.1923 17.2480 13.2495
Skewness 0.9063 1.9765 -0.0041 -0.7148 0.7577 -1.2513
Kurtosis 2.7073 6.3975 2.1650 2.6509 4.3622 3.2672
Jarque-Bera 4.0734 32.8284 0.8426 2.6169 5.0172 7.6545
Probability 0.1305 0.0000 0.6562 0.2702 0.0814 0.0218
Observations 30 30 30 30 30 30
Source: Researcher’s Construct (2023)

4.2 Pairwise Correlation

In furtherance to the univariate analysis of the variable, the study also explores the degree of
collinearity among the independent variables. It is important to understand the degree of
relationship among the explanatory variables. The result of the correlation analysis is captured in
Table 4.2. The result shows that environmental disclosure had positive and significant correlation
with the social disclosures (SOC) r=0.3957, p<0.05. It exhibits insignificant positive correlation
with the governance disclosures (GOV) r=0.1452, p>0.05. It exhibits a positive and insignificant
effect with leverage (LEV) r = 0.1882, p>0.05, and a positive and insignificant relationship with
return on asset (ROA) r= 0.2443, p>0.05. There was significant and positive correlation between
social disclosure and governance disclosure r = 0.6035, p<0.05. It exhibits a negative and
insignificant correlation with leverage r = -0.2357, p>0.05. It also exhibits a positive and
significant correlation with return on assets r = 0.4063, p<0.05. There is also a positive and
insignificant correlation between governance disclosures and leverage r = 0.1509, p>0.05. It also
exhibits a negative and insignificant correlation with return on assets r= -0.2741 and p>0.05.
There is a negative and significant correlation between leverage and return on asset r = -0.3692,
p<0.05. Although statistically significant correlation exists between environmental disclosures
and social disclosures, social disclosures and governance disclosures, social disclosures and
return on assets, return on assets and leverage, the degree of correlation was too small and it
can’t lead to collinearity problem.

Table 4.2: Correlation Matrix

Correlation
Probability COD ENV SOC GOV LEV ROA
COD 1.0000
-----

ENV -0.1283 1.0000

0.5071 -----

SOC -0.1151 0.3951 1.0000

0.5521 0.0339 -----

GOV 0.0029 0.1452 0.6035 1.0000

0.9883 0.4523 0.0005 -----

LEV 0.3402 0.1882 -0.2357 0.1509 1.0000

0.0710 0.3282 0.2184 0.4346 -----

ROA 0.0103 0.2443 0.4063 -0.2741 -0.3692 1.0000

0.9579 0.2015 0.0288 0.1502 0.0487 -----
Source: Researcher’s Construct (2023)
4.3 Panel Unit Root Test

Studies have shown that panel data have tendency of been mean variant and therefore, there is
need to test the stationarity condition of these variables. Levin, Lin and Chu test were adopted in
testing the variable unit root. The results are presented in table 4.3. The result of the test shows
that all variables are stationary at level and therefore, the model estimation can be carried out
using panel least square of which efficient and consistent estimate will be obtained. In line with
the theory, panel co-integration test and error correction model are not needed.

Table 4.3: Unit Root Test

Levin, Lin & Chu t*

Variables t-test P-value Remark
CoD -4.3896 0.0000 I(0)
Env -3.5832 0.0002 I(0)
Soc -7.3768 0.0000 I(0)
Gov -2.0040 0.0225 I(0)
LEV -13.7626 0.0000 I(0)
ROA -10.6969 0.0000 I(0)
Source: Researcher’s Construct (2023)

4.4 Interpretation of Regression Estimate of Environmental Social and Governance

Disclosure on Cost of Debt Listed Health Care Firms in Nigeria
Variance Inflation Factor

In estimating panel least square, it is expected that the assumption of ordinary least must not be
violated. In order to adhere to this assumption, study examine multicollinearity assumption of the
least model through the use of variance inflation factor. This test serves as sufficient test for
correlation. The result of the variance inflation test as presented in 4.4 indicates that all the
variables report VIF less than 10. This implies that there is no presence of multicollinearity
Table 4.4: Variance Inflation Factor

Coefficient Centered
Variable Variance VIF 1/VIF
ENV 19.4767 1.4304 0.6991
SOC 136.8797 4.3732 0.2287
GOV 80.6462 3.5085 0.2850
LEV 0.0042 1.4722 0.6793
ROA 0.0119 2.4463 0.4088
C 19.2989 NA
Source: Researcher’s Construct (2023)
Hausman test were carried to select the best model among the fixed effect and random effect.
The result as presented in Table 4.5 shows that Hausman test reject random effect and accept
fixed effect.
The outcome of an estimate is not complete without assessing the quality of the model residual.
In panel least square modeling, it is expected that the residual must be consistent and efficient.
Moreover, in order to be consistent and efficient, some certain assumption needs to be met.
Among the assumption is no serial correlation and homoskedasticity. In line with this
expectation, the study conducted serial correlation and heteroskedasticity test to ascertain the
level of violation of the assumption. The result of the serial correlation in Table 4.5 revealed that
the model residual accepts the null of no serial correlation, because the p-value of the test was
greater than 0.05, In the same vein, the heteroskedasticity test indicates the model residual
exhibit a constant variance. In view of this outcome, the assumption of no serial correlation and
homoscedasticity have not been violated, hence, the study adopted the fixed effect model as
specified by the Hausman test.
The result given in the Table 4.5 indicated that after the inclusion of the controlling variables, the
explanatory variables jointly explained 67.22% of the total variations of the cost of debts of
listed health care firms. The F-value measured the overall significance of the model. The F-value
of 3.6909 with p-value less than 0.05 revealed that the model is statistically significant and
therefore the coefficient of the model can be used for policy formation. The overall results show
that after controlling for all variables, Environmental, Social and Governance disclosures has
negative and insignificant effect on cost of debt of listed health care firms in Nigeria. This was
evidenced by the co-efficient value of the constant showing -4.6695, t-score of -0.8009 and a P-
value greater than 0.05. Moreover, this is a broad submission; the study assessed the individual
effect of the variable in the subsequent section.
4.4.1 The effect of Environmental Disclosure on Cost of Debt of Listed Health Care Firms
in Nigeria.
As shown in Table 4.5, after including the control variables, it was evidenced that there is a
negative and insignificant relationship between environmental disclosures and cost of debt of
listed health care firms in Nigeria with a coefficient value of -1.0333 and p-value greater than
0.05. This implies that a rise in environmental disclosures will lead to a fall in cost of debt.
However, the effect is considered weak and insignificant. One of the key benefits of
environmental disclosure is that it can lead to a decrease in the cost of debt for companies. This
is because environmental disclosure signals to lenders that a company is taking environmental
risks seriously and is therefore less likely to experience negative impacts on its financial
performance due to environmental factors. This, in turn, reduces the perceived risk of lending to
the company, leading to lower interest rates and a lower cost of debt. Environmental disclosure
provides investors and stakeholders with information about a company’s environmental risks and
liabilities. This information allows lenders to better understand the company’s risk profile,
enabling them to price the cost of debt more accurately. Companies that are transparent about
their environmental risks are therefore seen as more trustworthy and less risky, leading to a lower
cost of debt. The findings of this study collaborate with the findings of Wira and Suwinto (2021)
who examined the effect of ESG disclosures on cost of capital.
4.4.2 The effect of Social Disclosure on Cost of Debt of Listed Health Care Firms in
Nigeria.
As shown in Table 4.5, after including the control variables, it was evidenced that there is a
positive and insignificant relationship between social disclosures and cost of debt of listed health
care firms in Nigeria with a coefficient value of 14.3428 and p-value greater than 0.05. This
implies that a rise in social disclosures will lead to a rise in cost of debt. However, the effect is
considered weak and insignificant. One of the key drawbacks of social responsibility disclosure
is that it can lead to an increase in the cost of debt for companies. Social responsibility disclosure
signals to lenders that a company is taking on additional social and ethical responsibilities, which
could increase the risk of lending to the company. As a result, lenders may demand a higher rate
of interest to compensate for the increased risk. Social responsibility disclosure led to increased
scrutiny of a company’s social and ethical practices, which can lead to reputational risks.
Negative publicity or controversy related to a company’s social and ethical practices can lead to
a decline in demand for its securities, which can increase the cost of debt. This is because lenders
may view the company as less creditworthy and demand a higher rate of interest to compensate
for the increased risk. The findings of this study collaborate with the findings of Derry and
Vinola (2021) who examined the effect of sustainability disclosures on cost of finance.
4.4.2 The effect of Governance Disclosure on Cost of Debt of Listed Health Care Firms in
Nigeria.
As shown in Table 4.5, after including the control variables, it was evidenced that there is a
positive and insignificant relationship between governance disclosures and cost of debt of listed
health care firms in Nigeria with a coefficient value of 1.8003 and p-value greater than 0.05. This
implies that a rise in governance disclosures will lead to a rise in cost of debt. However, the
effect is considered weak and insignificant. Governance disclosure is a signal that a company is
taking on additional responsibilities and commitments related to governance. In this case, there is
an increase in the cost associated with compliance and monitoring which give rise to increased
regulatory scrutiny. These additional costs can lead to a higher cost of debt as lenders demand a
higher rate of interest to compensate for the increased expenses. The findings of this study
collaborate with the findings of Christopher and Joakim (2022) who examined the effect of ESG
disclosures on cost of capital.
Table 4.5: Regression Estimate

Fixed Effect Model

Variable Coeff t-Statistic Prob.
ENV -1.0333 -0.2332 0.8183
SOC 14.3428 0.8239 0.4208
GOV 1.8003 0.1869 0.8539
ROA -0.1393 -1.0432 0.3106
LEV 0.0623 1.0121 0.3249
C -4.6695 -0.8009 0.4336
R-squared 0.6722
Adjusted R-squared 0.4901
F-statistic 3.6909
Prob(F-statistic) 0.0078
Hausman Test 25.3657 (p = 0.0001)
Heteroskedasticity Test 0.8897 (p>0.05)
Serial Correlation Test 7.6939 (p>0.05)
Source: Researcher’s Construct (2023)
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary

This study aims at investigating the effect of ESG disclosures on the cost of debt of listed health

care firms in Nigeria. The study specifically investigates the effect of environmental disclosures,

social disclosures and governance disclosures on cost of debt. For the purpose of this study, ESG

disclosures serves as independent variable and cost of debt serve as the dependent variable.

The literature review of the study basically provides the basic conceptual issues, which include

the concept of Environmental, Social and Governance disclosures attached to it. Also, the

dependent variables which is cost of debt. The study also highlights the conceptual literature as

compiled from previous literature as well as the empirical review of literature from developed

and developing countries, including Nigeria, in relation to each of the study objectives. The

theoretical review was also summarized; the study was hinged on stakeholders’ theory.

The methodology used to achieve the stated objectives was provided. It includes data and their

sources; the populations, samples and sampling techniques; measurement of variables; model

specification and data analysis techniques employed in the study were stated. The various

measurements of variables were specifically explained as well. Data were gathered from the

annual reports of six (6) health care firms between the period of 2017-2021

The findings of the study showed that ESG disclosures has negative and insignificant effect on

the cost of debt of listed health care firms in Nigeria. Specifically, social and governance

disclosure has a positive effect while environmental disclosures have a negative effect.
5.2 Conclusion

The study therefore concludes that in explaining the effect of cost of debt, ESG disclosures is

paramount. However, there should be an adequate disclosure of environmental, social and

governance practices necessary in reducing cost of debt. The findings of the study further uphold

the stakeholder’s theory which implies that when a company's board of directors implements

adequate ESG policies, it may get long-term support from its stakeholders, which can favorably

affect its long-term worth, reduces the company perceived risk and reduces the cost of debt.

5.3 Recommendations

Based on the findings of the study, the following recommendations are made:

i. Management of health care firms should carefully assess the environmental factors

particular to its operations and adopt relevant environmental policies and disclosures that

seeks to address the negative impact of those factors.

ii. Management of health care firms should carefully assess the risk attached to its social

responsibility so that the risk will not outweigh the benefit.

iii. Management of health care firms should continuously conduct a scanning into its

governance practices so as to identify any risk associated to it and managing them

towards having a negative impact on the firm’s operations.

5.4 Contribution to Knowledge

This study has contributed to body of knowledge by providing findings that can be adopted as

the empirical evidence in similar and subsequent studies. The researcher also done justice to the

study review various ESG concepts and theories that are very important to the study. The study

also gives policy recommendations to the concern stakeholders.

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 APPENDIX

Null Hypothesis: Unit root (common unit root process)

Series: COD
Date: 03/11/23 Time: 22:16
Sample: 2017 2021
Exogenous variables: Individual effects
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Total number of observations: 23
Cross-sections included: 6

Method Statistic Prob.**

-
Levin, Lin & Chu t* 4.38958  0.0000

** Probabilities are computed assuming asympotic normality

Intermediate results on COD

Cross 2nd Stage Variance HAC of Max Band-

section Coefficient of Reg Dep. Lag Lag width Obs
Pharma-Deko -1.20621  0.0736  0.0617  0  0  3.0  4
Neimeth Int
Pharm -0.50593  0.9721  0.5229  0  0  2.0  4
Morison
Industries -0.56772  8.7361  5.6602  0  0  2.0  3
May & Baker Nig -0.54400  0.2835  7.6477  0  0  0.0  4
Glaxosmithkline
Nig  3.70370  0.0122  0.1997  0  0  0.0  4
Fidson
Healthcare -0.70542  16.360  21.628  0  0  0.0  4

Coefficient t-Stat SE Reg mu* sig* Obs

Pooled -0.50449 -4.547  2.149 -0.554  0.919  23

Null Hypothesis: Unit root (common unit root process)

Series: LENV
Date: 03/11/23 Time: 22:26
Sample: 2017 2021
Exogenous variables: Individual effects, individual linear trends
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Total (balanced) observations: 4
Cross-sections included: 1 (5 dropped)

Method Statistic Prob.**

-
Levin, Lin & Chu t* 3.58320  0.0002

** Probabilities are computed assuming asympotic normality

Intermediate results on LENV

Cross 2nd Stage Variance HAC of Max Band-

section Coefficient of Reg Dep. Lag Lag width Obs
Pharma-Deko Dropped from Test
Neimeth Int
Pharm -1.79048  0.0106  0.0142  0  0  3.0  4
Morison
Industries Dropped from Test
May & Baker Nig Dropped from Test
Glaxosmithkline
Nig Dropped from Test
Fidson
Healthcare Dropped from Test

Coefficient t-Stat SE Reg mu* sig* Obs

Pooled -1.79048 -4.804  1.000 -0.703  1.003  4

Null Hypothesis: Unit root (common unit root process)

Series: SOC
Date: 03/11/23 Time: 22:25
Sample: 2017 2021
Exogenous variables: Individual effects, individual linear trends
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Total (balanced) observations: 12
Cross-sections included: 3 (3 dropped)

Method Statistic Prob.**

-
Levin, Lin & Chu t* 7.37680  0.0000

** Probabilities are computed assuming asympotic normality

Intermediate results on SOC

Cross 2nd Stage Variance HAC of Max Band-

section Coefficient of Reg Dep. Lag Lag width Obs
Pharma-Deko -1.57143  9.E-05  0.0005  0  0  3.0  4
Neimeth Int
Pharm Dropped from Test
Morison
Industries Dropped from Test
May & Baker Nig -0.84379  0.0002  0.0006  0  0  3.0  4
Glaxosmithkline
Nig Dropped from Test
Fidson
Healthcare -1.33333  0.0002  0.0002  0  0  3.0  4

Coefficient t-Stat SE Reg mu* sig* Obs

Pooled -1.11882 -8.258  1.462 -0.703  1.003  12
Null Hypothesis: Unit root (common unit root process)
Series: GOV
Date: 03/11/23 Time: 22:28
Sample: 2017 2021
Exogenous variables: None
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Total (balanced) observations: 20
Cross-sections included: 5 (1 dropped)

Method Statistic Prob.**

-
Levin, Lin & Chu t* 2.00403  0.0225

** Probabilities are computed assuming asympotic normality

Intermediate results on GOV

Cross 2nd Stage Variance HAC of Max Band-

section Coefficient of Reg Dep. Lag Lag width Obs
Pharma-Deko -0.21053  0.0192  0.0256  0  0  0.0  4
Neimeth Int
Pharm -0.21293  0.0287  0.0420  0  0  0.0  4
Morison
Industries Dropped from Test
May & Baker Nig -0.25000  0.0117  0.0156  0  0  0.0  4
Glaxosmithkline
Nig -0.02635  0.0042  0.0013  0  0  3.0  4
Fidson
Healthcare -0.08398  0.0020  0.0054  0  0  1.0  4

Coefficient t-Stat SE Reg mu* sig* Obs

Pooled -0.07171 -2.100  1.073  0.004  1.049  20

Null Hypothesis: Unit root (common unit root process)

Series: LEV
Date: 03/11/23 Time: 22:29
Sample: 2017 2021
Exogenous variables: Individual effects, individual linear trends
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Total (balanced) observations: 20
Cross-sections included: 5 (1 dropped)

Method Statistic Prob.**

-
Levin, Lin & Chu t* 13.7626  0.0000

** Probabilities are computed assuming asympotic normality

Intermediate results on LEV

 Cross 2nd Stage Variance HAC of Max Band-
section Coefficient of Reg Dep. Lag Lag width Obs
Pharma-Deko -7.82388  1.2515  6.1487  0  0  3.0  4
Neimeth Int
Pharm -3.21820  1.5103  90.852  0  0  3.0  4
Morison
Industries Dropped from Test
May & Baker Nig -1.03546  54.074  15.658  0  0  3.0  4
Glaxosmithkline
Nig -0.25112  0.8705  0.1644  0  0  3.0  4
Fidson
Healthcare -1.77488  5.4058  11.799  0  0  3.0  4

Coefficient t-Stat SE Reg mu* sig* Obs

Pooled -2.99421 -15.045  2.367 -0.703  1.003  20

Null Hypothesis: Unit root (common unit root process)

Series: ROA
Date: 03/11/23 Time: 22:30
Sample: 2017 2021
Exogenous variables: Individual effects, individual linear trends
Automatic selection of maximum lags
Automatic lag length selection based on SIC: 0
Newey-West automatic bandwidth selection and Bartlett kernel
Total (balanced) observations: 20
Cross-sections included: 5 (1 dropped)

Method Statistic Prob.**

-
Levin, Lin & Chu t* 10.6969  0.0000

** Probabilities are computed assuming asympotic normality

Intermediate results on ROA

Cross 2nd Stage Variance HAC of Max Band-

section Coefficient of Reg Dep. Lag Lag width Obs
Pharma-Deko -0.29460  14.037  2.4058  0  0  3.0  4
Neimeth Int
Pharm -0.98653  1.4041  47.444  0  0  1.0  4
Morison
Industries Dropped from Test
May & Baker Nig -1.45186  1.0958  0.5165  0  0  3.0  4
Glaxosmithkline
Nig -1.81975  0.7590  1.0642  0  0  3.0  4
Fidson
Healthcare -0.68256  0.8137  0.6812  0  0  3.0  4

Coefficient t-Stat SE Reg mu* sig* Obs

Pooled -0.97111 -12.135  1.201 -0.703  1.003  20
Heteroskedasticity Test: Breusch-Pagan-Godfrey

F-statistic 0.889679    Prob. F(5,2) 0.6047

Obs*R-squared 5.518762    Prob. Chi-Square(5) 0.3559
Scaled explained SS 0.547435    Prob. Chi-Square(5) 0.9903

Test Equation:
Dependent Variable: RESID^2
Method: Least Squares
Date: 03/11/23 Time: 22:40
Sample: 6 24
Included observations: 8

Variable Coefficient Std. Error t-Statistic Prob.

C 2.910678 3.821790 0.761601 0.5259

LENV 2.785108 2.369815 1.175243 0.3609
SOC -26.06658 17.36615 -1.501000 0.2722
GOV 17.09494 10.27650 1.663497 0.2381
LEV 0.040450 0.036586 1.105615 0.3841
ROA 0.087950 0.049585 1.773710 0.2181

R-squared 0.689845    Mean dependent var 0.479264

Adjusted R-squared -0.085541    S.D. dependent var 0.912834
S.E. of regression 0.951075    Akaike info criterion 2.851258
Sum squared resid 1.809088    Schwarz criterion 2.910839
Log likelihood -5.405032    Hannan-Quinn criter. 2.449407
F-statistic 0.889679    Durbin-Watson stat 3.785994
Prob(F-statistic) 0.604743

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 7.693911    Prob. F(1,1) 0.2203

Obs*R-squared 7.079816    Prob. Chi-Square(1) 0.0078

Test Equation:
Dependent Variable: RESID
Method: Least Squares
Date: 03/11/23 Time: 22:42
Sample: 6 24
Included observations: 8
Presample and interior missing value lagged residuals set to zero.

Variable Coefficient Std. Error t-Statistic Prob.

LENV -0.367767 1.660024 -0.221543 0.8612

SOC 14.55102 13.21199 1.101350 0.4693
GOV -11.76064 8.334596 -1.411063 0.3925
LEV -0.116040 0.049017 -2.367318 0.2544
ROA -0.071575 0.043181 -1.657568 0.3456
 C 6.548257 3.562921 1.837890 0.3172
RESID(-1) -2.090359 0.753611 -2.773790 0.2203

R-squared 0.884977    Mean dependent var 2.22E-15

Adjusted R-squared 0.194839    S.D. dependent var 0.740088
S.E. of regression 0.664087    Akaike info criterion 1.689751
Sum squared resid 0.441011    Schwarz criterion 1.759262
Log likelihood 0.240996    Hannan-Quinn criter. 1.220925
F-statistic 1.282318    Durbin-Watson stat 1.876344
Prob(F-statistic) 0.588827

Correlated Random Effects - Hausman Test

Equation: Untitled
Test cross-section random effects

Chi-Sq.
Test Summary Statistic Chi-Sq. d.f. Prob.

Cross-section random 25.365666 5 0.0001

Cross-section random effects test comparisons:

Variable Fixed Random Var(Diff.) Prob.

ENV -1.033253 -5.439537 9.307218 0.1486

SOC 14.342813 -3.146744 230.472131 0.2493
GOV 1.800306 3.212380 50.041102 0.8418
ROA -0.139278 0.122608 0.011538 0.0148
LEV 0.062273 0.135259 0.001554 0.0641

Cross-section random effects test equation:

Dependent Variable: COD
Method: Panel Least Squares
Date: 03/11/23 Time: 22:46
Sample: 2017 2021
Periods included: 5
Cross-sections included: 6
Total panel (unbalanced) observations: 29

Variable Coefficient Std. Error t-Statistic Prob.

C -4.669546 5.830570 -0.800873 0.4336

ENV -1.033253 4.431380 -0.233167 0.8183
SOC 14.34281 17.40889 0.823879 0.4208
GOV 1.800306 9.633988 0.186870 0.8539
ROA -0.139278 0.133504 -1.043248 0.3106
LEV 0.062273 0.061529 1.012100 0.3249

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.672184    Mean dependent var 4.676207
Adjusted R-squared 0.490064    S.D. dependent var 4.976388
S.E. of regression 3.553630    Akaike info criterion 5.655513
Sum squared resid 227.3091    Schwarz criterion 6.174142
Log likelihood -71.00493    Hannan-Quinn criter. 5.817941
F-statistic 3.690883    Durbin-Watson stat 1.401405
Prob(F-statistic) 0.007806

Dependent Variable: COD

Method: Panel EGLS (Cross-section random effects)
Date: 03/11/23 Time: 22:51
Sample: 2017 2021
Periods included: 5
Cross-sections included: 6
Total panel (unbalanced) observations: 29
Swamy and Arora estimator of component variances

Variable Coefficient Std. Error t-Statistic Prob.

ENV -5.439537 3.214017 -1.692442 0.1041

SOC -3.146744 8.520410 -0.369318 0.7153
GOV 3.212380 6.540079 0.491184 0.6280
ROA 0.122608 0.079277 1.546578 0.1356
LEV 0.135259 0.047243 2.863068 0.0088
C -2.168543 3.199317 -0.677814 0.5047

Effects Specification
S.D. Rho

Cross-section random 5.72E-07 0.0000

Idiosyncratic random 3.553630 1.0000

Weighted Statistics

R-squared 0.210224    Mean dependent var 4.676207

Adjusted R-squared 0.038534    S.D. dependent var 4.976388
S.E. of regression 4.879567    Sum squared resid 547.6339
F-statistic 1.224438    Durbin-Watson stat 0.908875
Prob(F-statistic) 0.329580

Unweighted Statistics

R-squared 0.210224    Mean dependent var 4.676207

Sum squared resid 547.6339    Durbin-Watson stat 0.908875

Dependent Variable: COD

Method: Panel Least Squares
Date: 03/11/23 Time: 22:47
Sample: 2017 2021
Periods included: 5
Cross-sections included: 6
Total panel (unbalanced) observations: 29

Variable Coefficient Std. Error t-Statistic Prob.

ENV -1.033253 4.431380 -0.233167 0.8183

SOC 14.34281 17.40889 0.823879 0.4208
GOV 1.800306 9.633988 0.186870 0.8539
ROA -0.139278 0.133504 -1.043248 0.3106
LEV 0.062273 0.061529 1.012100 0.3249
C -4.669546 5.830570 -0.800873 0.4336

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.672184    Mean dependent var 4.676207

Adjusted R-squared 0.490064    S.D. dependent var 4.976388
S.E. of regression 3.553630    Akaike info criterion 5.655513
Sum squared resid 227.3091    Schwarz criterion 6.174142
Log likelihood -71.00493    Hannan-Quinn criter. 5.817941
F-statistic 3.690883    Durbin-Watson stat 1.401405
Prob(F-statistic) 0.007806