Environmental, Social and Governance Performance and Cash-Flow Reporting Quality in Firms in Nigeria

Abstract

This study, under the growing sustainability obligations and persistent concerns over financial reporting transparency, investigates the influence of Environmental, Social, and Governance (ESG) performance on cash flow reporting quality among listed consumer goods firms in Nigeria. It adopts an ex-post facto research design and analyse panel data spanning 2015–2024. It measures cash flow reporting quality as the absolute abnormal operating cash flow derived from the modified Dechow–Dichev accrual quality framework, while ESG performance was assessed using a structured checklist and an index-based scoring model. Using Ordinary Least Squares (OLS) and Panel Fixed-Effects regressions with leverage and firm size as control variables, the results show that overall ESG performance and the environmental pillar exert no statistically significant effect on cash flow reporting quality. However, the social and governance pillars significantly improve reporting quality, indicating that firms with stronger social responsibility practices and robust governance mechanisms are less prone to cash flow manipulation. The findings highlight the relevance of ESG integration, particularly social engagement and governance oversight, in enhancing financial reporting credibility. Hence, it recommends amongst others that regulatory bodies, including the Financial Reporting Council of Nigeria (FRCN), the Nigerian Exchange Group (NGX), and the Securities and Exchange Commission (SEC), should strengthen sectorspecific sustainability disclosure requirements. Similarly, firms should embed ESG considerations into their operational and risk governance structures, so as to improve cash flow relevance and strengthen investors’ confidence