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ENVIRONMENTAL DISCLOSURE PRACTICES AND STOCK MARKET RETURN VOLATILITY IN THE NIGERIAN STOCK MARKET
Abstract
Volatility of stock market return is of great concern to providers of funds as it increases the uncertainty of their future wealth. Many studies have address of environmental disclosure and the Nigerian stock market but few considered the effect of environmental disclosure on the volatility in the stock market. This study investigated the combined effects of environmental pollution and control policy (EPC), energy policy (ENP), impact of biodiversity (IB), waste management cost (WMC), environmental research and development cost (ERD), cost of compliance to environmental laws (CCEL), firm size (FSZ), and firm age (FA) on stock market return volatility. The study adopted ex post facto research design. The target population for the study comprised 48 companies quoted on the Nigerian Stock Exchange, under the consumer goods and industrial goods sectors, as at December 31, 2016. A sample size of 17 companies was determined using Cochran’s formula. Stratified proportionate sampling was adopted to select the number of companies studied from each stratum and samples from each stratum were purposively selected based on companies with higher total asset as at December 31, 2016. The results revealed that EPC, ENP, IB, WMC, ERD, CCEL, FSZ and FAG jointly had significant effect on Stock Market Return Volatility (SMRV). The individually ENP, IB, FSZ and FAG had significant negative effect on SMRV (β = -.053, -.131, -.026, -.006; t(253) = -2.28, -5.00, -5.82, -8.67; p < .05); while WMC had significant positive effect on SMRV (β = .113, t(253) = 2.43. p < .05).The study concluded that environmental disclosure practices were important factors in determining the stability of the Nigerian stock market. The study recommended that financial reporting council of Nigeria and other regulatory agencies should establish and implement environmental disclosure standards to mandate consistent disclosure of environmental information.
Keywords: Environmental disclosure, Stakeholders, Stock market, Volatility, Investors, Consumer goods sector, Industrial goods sector.