Climate Finance, Environmental Risk Accounting and Firm Value: A Comparative Study of Nigeria and South Africa
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Abstract
The study examined the relationship among climate finance (CF), Environmental Risk Accounting (ERA), and firm value for publicly listed non-financial firms in Nigeria and South Africa between 2010 and 2022. Using a carefully balanced panel sample consisting of 520 observations, we construct our independent variables as follows: Climate Finance (CF); Climate Financial Exposure (CFEI), using an AI-powered textual analysis approach; and Greenwashing Gap (GWG). Through fixed-effects panel regression, our results indicate that while climate finance does not directly influence firm value, CF and the quality of ERA practices interact positively, showing that CF only creates value conditional on high-quality ERA. Greenwashing risk is negatively associated with firm value, while environmental-risk-accounting quality is separately associated with higher firm value. Institutional differences across countries have consequences for the role of ERA. These results are examined using a double-theoretic approach that integrates institutional theory to justify how the regulation pressure leads to differences in accounting disclosures in different countries, and the resource-based theory, to justify how these differences influence firm value. The application of difference-in-difference analysis through the adoption of the King IV code by South African firms provides evidence consistent with an appreciable valuation premium by firms in South Africa after the intervention. The findings are broadly consistent across methods such as IV-2SLS, System GMM, Propensity Score Matching, and the Heckman Selection Model. There are important ramifications of the findings for accounting practice and environmental policy within sub-Saharan Africa.
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This Zenodo record is a permanently preserved version of a Structured PREreview. You can view the complete PREreview at https://prereview.org/reviews/23824175.
Does the introduction explain the objective of the research presented in the preprint? Partly This manuscript would benefit from a single explicit research question inferred from the Gap questions and a clearer statement of the identification logic as exclusion is slightly overstatedAre the methods well-suited for this research? Somewhat appropriate The methods are appropriate and the robustness effort is good, but the authors must systematically revise the manuscript, as the DiD's …This Zenodo record is a permanently preserved version of a Structured PREreview. You can view the complete PREreview at https://prereview.org/reviews/23824175.
Does the introduction explain the objective of the research presented in the preprint? Partly This manuscript would benefit from a single explicit research question inferred from the Gap questions and a clearer statement of the identification logic as exclusion is slightly overstatedAre the methods well-suited for this research? Somewhat appropriate The methods are appropriate and the robustness effort is good, but the authors must systematically revise the manuscript, as the DiD's causal claim (causality," "impacts," or "proving cause and effect") is not fully earned given the failed parallel-trends test and country-level treatment. The GMM check is compromised by AR(2)Are the conclusions supported by the data? Somewhat supported The paper overstates the strength of some claims, especially the DiD and the causal language. This manuscript should stick to the results gotten and presented in the limitation section.Are the data presentations, including visualizations, well-suited to represent the data? Somewhat appropriate and clear The data presentation is substantive and generally transparent, with strong descriptive and diagnostic tables but, some of the tables are overcrowded and difficult to follow.How clearly do the authors discuss, explain, and interpret their findings and potential next steps for the research? Somewhat clearly The discussion is rich, theoretically informed, and honest about limitations, but it does not fully reconcile its causal effect with its own diagnostic failures. The proposed next steps are sensible but sparse; "it is recommended to expand the sample to other African countries" is rigid. the paper would benefit from a more explicit research agenda tied to the identification problems it identifies.Is the preprint likely to advance academic knowledge? Highly likelyWould it benefit from language editing? NoWould you recommend this preprint to others? Yes, but it needs to be improvedIs it ready for attention from an editor, publisher or broader audience? Yes, after minor changesCompeting interests
The author declares that they have no competing interests.
Use of Artificial Intelligence (AI)
The author declares that they did not use generative AI to come up with new ideas for their review.
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