EFFECTS OF ENVIRONMENTAL COSTS ON FINANCIAL PERFORMANCE OF LISTED FIRMS IN NIGERIA

EFFECTS OF
ENVIROMENTAL COSTS ON
FINANCIAL PERFORMANCE OF
LISTED FIRMS IN NIGERIA

Andrew Agbiogwu 1 , John U. Ihendinihu 2 &
Joseph U. B. Azubike 3

Department of Accountancy, Alvan Ikoku
Federal College of Education, Owerri, Imo
State.
andy255k@gmail.com
2&3
Department of Accounting, College of
Management Sciences, Michael Okpara
University of Agriculture, Umudike.
ihendinihu.john@gmail.com and
jubelazubike@yahoo.co

ABSTRACT
The study investigates the effect of
environmental costs on the financial
performance of listed firms in Nigeria. The
objective is to determine the influence of
Research and Development Costs (RDC),
Community Development Costs (CDC) and
Employee Health and Safety Costs (EHSC) on
Net Profit Margin (NPM) and Return on
Assets (ROA) of companies quoted on the
Nigerian Stock Exchange.
Panel data on the environmental costs and
the financial performance proxies were
extracted from published financial statements
of twenty-five entities on the Exchange for a
period of seven years 2012 to 2018 and
analyzed using balanced panel regression
techniques. Results reveal that the
environmental cost components jointly
explain about 76.4% and 70.2% of the

variations in NPM and ROA respectively. CDC
and EHSC where implicated as significant
predictors of NPM, while RDC and CDC were
statistically significant predictors of ROA. The
paper therefore concludes that
environmental costs have positive and
significant long term tradeoffs on corporate
financial performance and recommends that
listed entities in Nigeria should increase their
investments in environmental costs (CDC,
RDC and EHSC) as a strategic policy for
creating friendly environment for long term
growth in financial performance.
Keywords: Research and Development Cost,
Community Development Cost, Employee
Health and Safety Cost, Net Profit Margin,
Return on Assets

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