The Effect of Sustainability Reporting Quality Mediated by Information Transparency on Investment Efficiency in Nigeria

This study examines the effect of sustainability reporting quality on investment efficiency in Nigeria and the mediating role of information transparency using panel data from 152 publicly listed firms over 2015–2024, yielding 1,520 firm-year observations. Descriptive statistics indicate mild average investment inefficiency, with underinvestment more prevalent than overinvestment, reflecting capital market constraints in emerging economies. Sustainability reporting quality and information transparency exhibit moderate mean levels and substantial cross-firm heterogeneity. Correlation analysis shows that investment efficiency is positively associated with sustainability reporting quality and information transparency, while leverage is negatively related, and multicollinearity is not a concern. Fixed-effects regression results reveal that sustainability reporting quality significantly improves investment efficiency. Mediation analysis demonstrates that sustainability reporting quality enhances information transparency, which in turn increases investment efficiency, with transparency mediating about 57 percent of the total effect. Additional analyses show that both sustainability reporting quality and transparency significantly reduce overinvestment and underinvestment, with stronger effects on overinvestment. Robustness checks using instrumental variables, system GMM, alternative specifications, and subsample analyses confirm the stability of the findings. Temporal analysis indicates that the effects strengthen over time, consistent with institutional learning and evolving disclosure practices. Overall, the results provide robust evidence that high-quality sustainability reporting improves capital allocation efficiency in Nigerian firms primarily by enhancing information transparency, with clear implications for regulators, investors, and corporate governance reforms.