Andrew Agbiogwu 1 John U. Ihendinihu 2 & Joseph U. B. Azubike 3
1 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 Uniiversity of Agriculture, Umudike.

The study investigated 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
companies on the Nigerian Stock Exchange for a period of seven years (2012 to 2018) and
analyzed using balanced panel regression techniques. Results revealed that the environmental
cost components jointly explain about 76.4% and 70.2% of the variations in NPM and ROA
respectively. CDC and EHSC were implicated as significant predictors of NPM, while RDC
and CDC were statistically significant in predicting ROA. The paper therefore concludes that
environmental costs have positive and significant long term trade-offs 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 Co t. Community Development Cost. Employee
Health and Safety Cost, Net Profit Margin, Return on Assets.

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