Sustainability Reporting and Market Value of Deposit Money Banks in Nigeria

Abstract

Sustainability reporting has emerged as a key component of corporate disclosure, providing stakeholders with non-financial information that complements traditional financial statements in assessing firm value and long-term viability. In the banking sector, increasing investor attention to environmental, social, and economic performance indicators reflects a broader shift toward integrating sustainability considerations into market valuation and investment decision-making processes. Sustainability reporting (SR) through environmental (ESM), social (SSM), and economic (EM) metrics has increasingly become one of the non-financial information sets that investors rely on in determining market value (MV) of firms.  Indicators such as Tobin’s Q(TBQ) is critical indicator of how investors can assess the performance, risk profile, and future prospects of deposit money banks. However, there is limited evidence on the differential effects of environmental, social, and economic metrics on market value within the Nigerian banking sector. This study to empirically examined whether sustainability disclosures by Nigerian deposit money banks are value-relevant and whether they translate into favorable market perceptions.

The Study adopted ex post facto research design. Cross-sectional observations of 13 banks and time series data of 10 years spanning from 2015 to 2024 was used to analyse the effect of SR on MV of Nigeria banks. Data were obtained from published financial statements and accounts of selected banks. The study adopted both descriptive and inferential (multiple regression) statistics to analyse the data at 5% level of significance.

Findings revealed that joint Sustainability Reporting metrics (environmental (ESM), social (SSM), and economic (EM) metrics have significant effect on market value TBQ (Adj. R² = 0.87, F(6,124) = 53.0 , P<0.05); Specifically, ESM has significant effect on market value ( λ₁ = -0.007, t= 2.1927, P = 0.0304)    SSM has insignificant effect on market value (λ₂ = -0.0005, t = -0.1089, P = 0.9134), EM has in significant effect on market value (λ₃ =0.0055, t = 1.1201, P = 0.2650)

The study concludes that environmental sustainability reporting has a negative and significant effect on Tobin’s Q of Nigerian deposit money banks, while social and economic metrics, as well as bank size, are insignificant, and excessive liquidity reduces market valuation, highlighting -investors’ preference for short-term profitability. It is therefore recommended that banks adopt cost-efficient environmental practices and strengthen sustainability disclosures by clearly linking social and governance initiatives to measurable financial benefits such as deposit growth and reduced non-performing loans to enhance investor confidence

Keywords: Sustainability reporting, environmental, social, economic, Tobin’s Q, price-to-book ratio, return-on-equity, return-on-asset

DOI: 10.7176/RJFA/17-3-02

Publication date: July 30^th 2026