Modelling the Effect of Monitoring Mechanisms on Environmental Disclosure of Listed Firms in Nigeria

Abstract

The growing prevalence of environmental issues globally has intensified the demand for greater transparency and accountability in corporate Environmental Disclosure (ED). In Nigeria, however, ED practices remain largely discretional, with no formal regulatory framework mandating such disclosures. The study thus investigates the combined effect of the latent constructs of board and audit committee monitoring mechanisms on the extent of ED among firms listed in Nigeria. Adopting a survey research design, the study analysed audited annual reports of 95 listed firms on the Nigerian Exchange Group (NGX) from 2012 to 2021, The Global Reporting Index (GRI) was employed to assess the level of ED across firms providing a standardised basis for measurement. Structural Equation Modelling (SEM) technique was utilised to estimate the relationships between the identified monitoring mechanisms and ED practices. The findings reveal that both board and audit committee monitoring mechanisms have a significant positive impact on ED. Based on the findings, the study recommends that Nigerian firms should pay more attention to fostering diverse boards and including experienced members. In addition, ED and regulators should consider enacting policies that will mandate minimum qualifications or certifications for audit committee members. Additionally, industry specific governance codes could be considered to ensure that audit practices align with firms’ specific attributes.