Nexus of Information Asymmetry, Environmental Externalities and Financial Performance: Evidence from Listed Nigerian Companies

Confidence Joel Ihenyen,Ebipanipre Gabriel Mieseigha

doi:10.13164/trends.2020.35.35

Abstract

Purpose of the article: There is dearth of empirical studies on the association between information asymmetry, environmental externalities and financial performance, especially in Nigeria. Thus in this paper, we examined the nexus of information asymmetry, environmental externalities and financial performance of listed Nigerian firms. Methodology/methods: In order to attain this, the ex-post facto design was adopted and the simple random sampling technique was used in selecting ten (10) firms in the industrial and consumer goods subsector with data spanning from 2012–2017. The data were obtained from the financial statements of the companiws and the Nigerian Stock Exchange Factbook, while the analysis was carried out via the ordinary least square, fixed and random effects statistical tool. Scientific aim: This paper assessed the nexus of information asymmetry, environmental externalities and financial performance in Nigeria. Findings: The study found a clear indication that the level of financial performance of industrial and consumer goods companies in Nigeria is significantly influenced by the information asymmetry, as well as environmental externalities. Contributions: In view of the findings, it was recommended that there should be collaboration between the government and regulatory framework of accounting in order to advance a robust and clear-cut legislation on disclosure of environmental externalities and information irregularity in the financial statements of companies. Also, this study contributes to knowledge by filling the gap in literature, as well as showing that apart other dynamics that may influence financial performance, information asymmetry and environmental externalities are seemingly fundamental.

Highlights

In the corporate environment, financial reporting and disclosure are potentially fundamental avenues through which management convey financial performance and governance to its shareholder
The study used questionnaire and the results revealed that information asymmetry has a correlation with the lack of full disclosure and objectivity of financial statements, as well as the lack of value disclosure of negative economic externalities
The expo-facto design was adopted and secondary data were obtained from annual reports and accounts of selected industrial and consumer goods companies quoted on the Nigerian Stock Exchange (NSE)

Summary

Introduction

Financial reporting and disclosure are potentially fundamental avenues through which management convey financial performance and governance to its shareholder. Firms provide disclosure via regulated financial reports together with management reports and other regulatory documents admitted by the regulatory framework of accounting (the International Financial Reporting Standard: IFRS). Firms engage in voluntary communication in areas of management forecasts, press releases, conference calls and other corporate reports that may be helpful in assessing its financial performance. Given the dynamisms in financial reporting and disclosure by firms, there arise sporadically the information asymmetry and environmental externalities which may tend to impinge financial performance. Information asymmetry means different people knowing different things. Preparers of financial statements know more about financial reporting than shareholders

Methods

Results

Conclusion