Environmental, Social and Governance Disclosure and the Financial Stability of Quoted Deposit Money Banks in Nigeria: Heterogeneous Effects on Profitability, Capital, Liquidity, Asset Quality and Insolvency Risk

This study examines the relationship between environmental, social and governance (ESG) disclosure and the financial stability of quoted deposit money banks in Nigeria, and whether governance structure moderates that relationship. Using panel data hand-collected from the audited annual and sustainability reports of twelve banks listed on the Nigerian Exchange Group over 2015–2025, this study relates an 18-item content-analysis ESG disclosure index and its environmental, social and governance sub-indices to five bank-level stability indicators: capital adequacy, liquidity, asset quality (non-performing loans), profitability (return on assets) and insolvency risk (Z-score). Bank fixed-effects models with Driscoll–Kraay standard errors form the baseline, and fixed-effects two-stage least squares (FE-2SLS) is used as a robustness check for potential endogeneity. The composite ESG index is positively and significantly associated with profitability, a result that persists in the FE-2SLS estimates, but its associations with liquidity, non-performing loans and the Z-score are insignificant and its association with capital adequacy is negative; the associations between disclosure and stability are therefore heterogeneous across its dimensions rather than uniformly positive. Governance structure, entered as a separate regressor, is directly associated with higher capital adequacy and profitability and with lower non-performing loans, whereas its interaction with disclosure is statistically significant only for capital adequacy and liquidity and is sensitive to the exclusion of individual banks, so that the moderation evidence is treated as fragile. Among the disclosure dimensions, governance disclosure is most consistently associated with stability, environmental disclosure is associated with lower capital adequacy and social disclosure is associated with higher non-performing loans. The near-saturation of the disclosure index among these large banks limits within-bank variation and counsels caution in interpretation. The findings suggest that regulators should prioritise the credibility and quality of disclosure, and the governance mechanisms that underpin it, rather than its quantity.