The Impact of Sustainability Disclosures on the Liquidity of Listed Manufacturing Firms in Nigeria

Abstract

This study examines the impact of Sustainability Reporting Disclosures (SRD) on the Liquidity (LIQD) of listed manufacturing firms in Nigeria over the period 2012 to 2023. A purposive sampling technique was employed to select 35 firms from a total population of 69. Liquidity was measured using the current ratio, while SRD was assessed through environmental (ENVR), social (SOCR), and governance (GOVN) reporting metrics. The analysis utilized descriptive statistics and the Difference Generalized Method of Moments (GMM) estimation. The results show that environmental (ENVR), social (SOCR), and governance (GOVN) disclosures each exert a statistically significant negative impact on liquidity, as indicated by t-statistics of -3.6470, -8.1315, and -2.3009, respectively, with all corresponding p-values below the 0.05 threshold. While this indicates a short-term adverse effect, the study concludes that sustainability reporting significantly influences the liquidity of manufacturing firms in Nigeria. The study recommends that firms and investors approach sustainability disclosures with a long-term strategic outlook. While environmental, social, and governance (ESG) reporting may initially exert downward pressure on liquidity, these practices are instrumental in building long-term value, financial resilience, and sustainable growth. Rather than viewing the short-term liquidity impact as a deterrent, stakeholders should recognize sustainability reporting as an investment in the future stability and competitiveness of Nigeria’s manufacturing sector.