MODERATING EFFECT OF OPERATIONAL EFFICIENCY ON SOCIAL DISCLOSURE AND COST OF DEBT FOR LISTED NON-FINANCIAL COMPANIES IN NIGERIA

Godwin Terhile Kutse; Dr. Luper Iorpev; Dr. Kwaghfan Aondoakaa

Authors

Godwin Terhile Kutse Department of Accounting, Rev. Fr. Moses Oshio Adasu University, Makurdi, Nigeria
Dr. Luper Iorpev Department of Accounting, Rev. Fr. Moses Oshio Adasu University, Makurdi, Nigeria
Dr. Kwaghfan Aondoakaa Department of Accounting, Rev. Fr. Moses Oshio Adasu University, Makurdi, Nigeria

Keywords:

Cost of debt, Social disclosure, Operational efficiency, Non-financial companies.

Abstract

This study delves into how operational efficiency moderates the relationship between social disclosure and the cost of debt for non-financial companies listed on the Nigerian Exchange Group (NGX) from 2012 to 2024. The sample includes 61 non-financial companies. The study adopts an ex post facto design, while annual reports are sourced to collect secondary data from the sampled non-financial companies. The research further employs panel regression techniques for data analysis, and the results show that social disclosure significantly increases the cost of debt. However, the study also finds that operational efficiency reduces the cost of debt with a significant effect. When incorporating the interaction term, it shows that operational efficiency combined with social disclosure significantly decreases the cost of debt. The finding suggests that in Nigeria, social disclosure raises the cost of debt, but when combined with operational efficiency, it results in a significant reduction. The study recommends that policymakers and regulators should make sustainability standards stronger, such as social disclosure, which will give more confidence to lenders who are willing to provide loans to companies at favourable terms. Additionally, policymakers should develop sound policies to encourage company performance, and regulatory authorities should ensure that by 2030, all companies adopt sustainability reporting standards. Finally, lenders should always integrate both profitability and social disclosure in the loan negotiation process, and companies should embark on credible disclosure without compromising profitability.

References

Adelegan, O. J. (2020). Financial structure and financing constraints in emerging markets. African Development Review, 32(2), 200–215.

Andersson, J. & Schwartz, P. (2024). Can ESG disclosure and ESG performance reduce the cost of debt? Publications from Uppsala University, 37.

Apergis, N., Poufinas, T., & Antonopoulos, A. (2022). ESG scores and cost of debt. Energy Economics, 112(C).

Dua, J., & Sharma, A. K. (2024). Corporate sustainability and capital costs: A panel evidence from BRICS countries. Indian Journal of Corporate Governance, 17(1), 77-101.

Eliwa, Y., Aboud, A., & Saleh, A. (2021). ESG practices and the cost of debt: Evidence from EU countries. Critical Perspectives on Accounting, 79, Article 102097.

Erragragui, E. (2018) Do creditors price firms’ environmental, social and governance risks? Research in international business and finance, 45 (c), 197–207.

Fandella, P., Sergi, B. S., & Sironi, E. (2023). Corporate social responsibility performance and the cost of capital in BRICS countries. The problem of selectivity using environmental, social and governance scores. Corporate Social Responsibility and Environmental Management, 30(4), 1712–1722.

Global Reporting Initiative. (2024). GRI Standards. Global Reporting Initiative

Gray, R., Owen, D., & Adams, C. (Eds.). (1996). Accounting and accountability: Changes and challenges in corporate social and environmental reporting. Prentice Hall.

Gujarati, D. and Sangeetha, N. (2007). Basic Econometrics (4th ed.). New Delhi: Tata McGraw-Hill.

Guo, M., Zheng, C., & Li, J. (2024). Corporate social responsibility and debt financing cost: Evidence from China. Environment, Development and Sustainability, 26(7), 17475-17503.

Hamrouni, A., Uyar, A., & Boussaada, R. (2020). Are corporate social responsibility disclosures relevant for lenders? Empirical evidence from France. Management Decision, 58(2), 267–279.

Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323–329.

La Rosa, F., Liberatore, G., Mazzi, F., & Terzani, S. (2018). The impact of corporate social performance on the cost of debt and access to debt financing for listed European non-financial firms. European Management Journal, 36(4), 519-529.

Larsson, F., & Larsson, H. (2024). Impact of ESG performance and carbon emissions on cost of debt: A study of the Nordic markets, [Master Thesis, Department of Business Studies, Uppsala University]. Uppsala University.

Lavin, A. M., & Montecinos-Pearce, L. A. (2022). Heterogeneous firms and benefits of ESG disclosure: Cost of debt financing in an emerging market. Sustainability, 14(23), 15760.

Liu, J., Ahmad, M. I., Ahmad, M., Nevi, G., & Cucari, N. (2025). Corporate governance and cost of debt: Mediating role of environmental, social, and governance disclosure. Sustainable Development, 33(4), 5458-5469.

Luo, W., Xiaoxin G., Shihu Z., & Juanzhi W. (2019). Environmental information disclosure quality, media attention and debt financing costs: Evidence from Chinese heavy polluting listed companies. Journal of Cleaner Production, 231: 268–77.

Mustikawati, L., & Nalurita Purnama Siregar, S. V. (2025). The influence of ESG controversies on cost of debt with the moderating role of ESG performance and corporate governance in ASEAN‑5. Eduvest – Journal of Universal Studies, 5(6), 6183–6198.

Ntim, C. G., & Soobaroyen, T. (2013). Corporate governance and performance in socially responsible corporations. Corporate Governance: An International Review, 21(5), 468–494.

Ofoegbu, G. N., & Megbuluba, A. C. (2018). Corporate disclosure and cost of capital in Nigeria. Journal of Accounting and Taxation, 10(5), 55–66.

Ofogbe, N. S., Ojiakor, I. P., Nnamani, C., Ihegboro, I. M., Anisiuba, C. A. & Lass, R. (2021). Long-run relationship of corporate social responsibility and cost of capital of quoted companies in Nigeria Stock Exchange: Nigeria evidence. Universal Journal of Accounting and Finance 9(5): 946-960

Priem, R. & Gabellone, A. (2024). The impact of a firm’s ESG score on its cost of capital: can a high ESG score serve as a substitute for a weaker legal environment. Sustainability Accounting, Management and Policy Journal, 15(3), 676-703.

Raimo, N., Caragnano, A., Zito, M., Vitolla, F., & Mariani, M. (2021). Extending the benefits of ESG disclosure: The effect on the cost of debt financing. Corporate Social Responsibility and Environmental Management, 28(4), 1412–1421.

Raimo, N., Vitolla, F., Marrone, A., & Rubino, M. (2021). Do ESG disclosures affect the cost of debt? Journal of Cleaner Production, 318, 128–476.

Ratajczak, P., & Mikołajewicz, G., (2021). The impact of environmental, social and corporate governance responsibility on the cost of short and long-term debt. Econ. Bus. Rev. 7 (2), 74–96.

Rong, X., & Kim, M.-I. (2024). ESG and the cost of debt: Role of media coverage. Sustainability, 16(12), 4993.

Ross, S. A., Westerfield, R. W., Jaffe, J. F., & Jordan, B. D. (2016). Corporate finance (3rd European ed.). McGraw-Hill Education.

Saputra, A., & Rahman, A. (2024). ESG performance and its impact on mitigating cost of capital: Evidence from Southeast Asia. E-Jurnal Akuntansi, 34(8), 2054-2072

Shi, B. (2024). ESG performance and debt financing cost. 1-110. Available at: https://ink.library.smu.edu.sg/etd_coll/612

Shi, Y., Zheng, S., Xiao, P., Zhen, H. & Wu, T. (2024). ESG performance and cost of debt. China Journal of Accounting Research, 17 (4).

Spence, M. (1973). Job market signalling. The Quarterly Journal of Economics, 87(3), 355–374.

Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610

Tanin, T. I., Sarker, T., Hammoudeh, S., & Batten, J. A. (2024). The determinants of corporate cost of debt during a financial crisis. The British Accounting Review, 56(6), 101305.

Titus, I., Gbegi, D. O., & Okoh, U. (2023). Moderating impact of inflation rate on the relationship between capital structure and financial performance of Nigerian consumer goods companies. International Journal of Sustainable Applied Sciences (IJSAS), (1),5, 643-656

Uyar, A., Gerged, A. M., Kuzey, C., & Karaman, A. S. (2024). Do CSR performance and reporting facilitate access to debt financing in emerging markets? The role of asset structure and firm performance. Review of Accounting and Finance, 23(1), 68–95

Wen, F., Su, S., & Shao, L. (2023). Corporate sustainability performance and financing costs in emerging markets. Finance Research Letters, 54, 103–137.

Wu, Y. (2024). The impact of corporate ESG performance on debt financing costs. Transactions on Economics, Business and Management Research, 6

You, X., Chen, C., Peng, K., & Li, Y. (2025). ESG disclosure quality and cost of debt. Emerging Markets Review, 64, Article 101219.

Zhang, L., Liu, Y., & Chen, H. (2024). Impact of ESG rating disagreement on debt financing costs: Evidence from Chinese A-share listed companies. Preprints, 091001.

MODERATING EFFECT OF OPERATIONAL EFFICIENCY ON SOCIAL DISCLOSURE AND COST OF DEBT FOR LISTED NON-FINANCIAL COMPANIES IN NIGERIA

Authors

Keywords:

Abstract

References

Downloads

Published

Issue

Section

License