CARBON EMISSION DISCLOSURE AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

This study investigates whether carbon emission disclosure translates into improved financial
performance in an emerging-market. Using firm-level panel data from 2015 to 2024, the study examines
scope-specific disclosure, namely Scope 1 (direct emissions), Scope 2 (energy-related indirect
emissions), and Scope 3 (value-chain emissions), and evaluates their implications for financial
performance measured by return on assets (ROA) and return on equity (ROE). The study adopts an ex
post facto research design and employs panel estimation techniques comprising pooled Ordinary Least
Squares (OLS), Fixed Effects (FE), and Random Effects (RE) models, with firm size, earnings per
share, and leverage included as control variables. Data were obtained from audited annual reports and
sustainability disclosures of listed manufacturing firms in Nigeria. The findings reveal that Scope 2
disclosure has a negative and statistically significant relationship with both ROA and ROE. In contrast,
Scope 1 and Scope 3 disclosures exhibit statistically insignificant relationships with financial
performance. The study concludes that carbon emission disclosure alone does not automatically
enhance firm performance, particularly in emerging economies characterized by weak environmental
enforcement and infrastructural constraints. The study recommends that managers should complement
carbon disclosure with substantive investments in energy efficiency and cleaner production
technologies, while policymakers should strengthen environmental reporting standards and introduce
supportive incentives like energy subsidies, tax reliefs to improve firms’ sustainability and financial
outcomes. The study contributes to the literature by providing Africa-specific evidence and by
disaggregating carbon emission disclosure into Scope 1, Scope 2, and Scope 3 categories to reveal their
heterogeneous financial implications.