Corporate Financial Attributes and Sustainability Disclosure: The Moderating Effect of Foreign Ownership

Abstract

This paper investigates the effect of corporate financial attributes (leverage and profitability) on sustainability disclosure, with the moderating role of foreign ownership among listed companies in Nigeria. The study addresses the gap in voluntary sustainability disclosure settings, where foreign investors may influence reporting incentives differently from mandatory disclosure regimes. The study is anchored on legitimacy theory and adopts a positivist research philosophy and ex post facto research design, respectively. Secondary data were sourced from the annual reports of thirty-six (36) companies purposively selected from companies listed on the Nigerian Exchange Group as at 31st December 2023, producing 424 firm-year observations. Sustainability disclosure was operationalised using disclosed economic, environmental, and social indicators of the Global Reporting Initiative (GRI). The Panel Generalized Method of Moments (Panel GMM) regression technique was employed for data analysis, with foreign ownership used as a moderating variable. The findings showed that leverage has a negative and significant relationship with sustainability disclosure, while profitability has a positive but insignificant effect on sustainability disclosure. When moderated by foreign ownership, leverage shows a negative and insignificant relationship, while profitability exhibits a significant and positive relationship. The findings highlight the importance of foreign ownership in enhancing the sustainability impact of profitable firms. The study concludes that foreign ownership is important in enhancing the sustainability impact of profitable companies in emerging economies.

Keywords: Leverage; Profitability; Foreign Ownership; Sustainability Disclosure; Nigeria.