Impact of Environmental Accounting Disclosure on Cost of Capital in Nigeria
Keywords:
Keywords: Environmental AccountiAbstract
Objectives: This study investigates the impact of environmental accounting disclosure on the cost of capital among Nigerian oil and gas companies. Specifically, the study examines whether effluents and waste disclosure, energy disclosure, enviromental laws and regulations significantly influence cost of capital. Prior Work: A review of emprical data from earlier studies reveals that prior investigations have predominantly focused on the manufacturing sector, consumer goods industries and non-financial entreprises, neglecting a concentrated examination of the oil and gas sector specifically. Further, from the analyses of previous studies, which have yielded heterogeneous outcomes; thus, suggesting the presence of incongruent findings. This study explores the impact of environmental accounting disclosure and cost of capital in Nigeria. Approach: Spanning a decade from 2014 to 2023, the study uses data derived from the annual reports and financial statements of eight publicly traded oil and gas firms listed on the Nigerian Exchange Group (NGX). Adopting an ex-post facto research design and utilizing both descriptive and inferential statistical techniques, panel-corrected standard error methods were employed for hypotheses testing. Results: Demonstrate that disclosures related to effluents and waste have a positive but statistically insignificant influence on capital costs, while adherence to environmental laws and regulations presents a negative but also statistically insignificant effect. Conversely, energy disclosure reveal a statistically significant positive impact, implying that enhanced transparency in energy reporting may be associated with higher capital costs. While effluents and waste disclosures do influence capital costs, their effect remains statistically insignificant. Implications and Value: The study advises companies to reevaluate their energy disclosure strategies, while policymakers should consider modifying regulations to alleviate potential increases in capital costs. It also enhance the extant body of knowledge by providing empricial evidence on other aspects of environmental accounting disclosure which could be relevant to the researchers.
References
Abba, M., Said, R. M., Abdullah, A., & Maha, F. (2018). The relationship between environment operational performance and environmental disclosure of Nigerian listed companies. Journal of Environmental Accounting and Management, 6(1), 1-15.
Adegbie, F. F., Dada, S. O., & Ajayi, A. (2023). Environmental Disclosure and return on assets of manufacturing companies listed in Nigeria. International Journal of Economics, Business and Management Research, 7(6), 195-211.
Afonso, D.(2021). How do ESG rating impact the cost of debt? A study on European firms. Dissertation submitted in partial fulfillment of requirements for the MSc in finance, at the Universidade Catolica Portuguesa and ESCP Europe Paris.
Akpan, D. C., & James, J. A. (2024). Empirical analysis of the Nexus between corporate social responsibility and cost of capital of consumer goods firms in Nigeria. International Journal of Finance and Economics Research, 12(1), 53-65.
Alhares, A., & Alhares, O. M. (2019). The impact of corporate governance mechanisms on risk Disclosure [special issue]. Corporate ownership and control, 17(4), 292-307.
Barbu, E., Dumontier, P., Feleaga, N., & Feleaga, L. (2018). Mandatory environmental disclosures by companies complying with IASs/IFRSs: the cases of France, Germany and the UK. International Journal of Accounting, 49(12), 231-247.
Bartolacci, F., Paolini, A., Quaranta, A. G., & Soverchia, M. (2018). Assessing factors that influence waste management financial sustainability. Waste management 79, 571-579.
Berdugo, S., & Mefor, I. (2012). The impact of environmental accounting and reporting on sustainable development in Nigeria. Research Journal of Finance and Accounting, 14(37), 55-63.
Bonetti, P., Cho, C. H., & Michelon, G. (2023). Environmental disclosure and the cost of capital: Evidence from the Fukushima nuclear disaster. Journal of Business Ethics, 17(3), 775-794.
Breley, R. A., Myers, S. C., & Allen, F. (2017). Principles of corporate finance. McGraw-Hill Education.
Campa, D., & Kern, A.(2020). Employee stock ownership and cost of capital: evidence from the S & P 500. Journal of Corporate Accounting and Finance, 31(3), 150-162.
Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset. John Wiley and sons.
Deegan, C. (2002). The legitimizing effect of social and environmental Disclosure: A theoretical foundation. Auditing Accountability Journal, 4(1), 32-38.
Dogan, B., & Acar, M.(2020). The impact of corporate governance on cost of capital: and application on the firms in the manufacturing industry in Borsa Istanbul. Centre for European Studies (CES) Working Papers, 12(1), 23-44.
El Ghoul, S., Guedhami, O., Kwok, C. C., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking and Finance, 35(9), 2388-2406.
Emeka, L. O., Nwezu, A. U., & Nwadiolor, E. O. (2020). Effect of social and environmental disclosures on performance of non-financial firms in Nigeria. Journal of Accounting and Financial Management, 6(1), 40-58.
Farooq, U., Wen, J., Tabash, M. I., & Fadoul, M. (2024). Environmental regulations and capital investment: Does green innovation allow to grow? International Review of Economics and Finance, 89 (Part A), 878-893.
Gatimbu, K., & Wabuife, J. (2016). Effects of corporate Environmental disclosure of financial performance of firms listed at Nairobi security exchange Kenya. International Journal or Sustainability Management and Information Technologies, 2(2), 1-6.
Gray, R. (2010). Is accounting for sustainability actually accounting for sustainability woodmore and how would we know? An exploration of narratives of organizations and the planet. Accounting Organizations and Society, 35(1), 47-62.
Hansen, D., & Mowen, M. (2003). Cost management accounting control (4th ed.) USA: Thompson South Western.
Igbekoyi, O. E., Ogungbade, O. I., & Olayele, A. G. (2021). Financial performance. European Journal of Accounting, Auditing and Finance Research, 10(2), 31-51.
Ikpor, I. M., Bracci, E., Kanu, C. I., Ievoli, R., Okezie, B., Mlanga, S., & Ogbaekirigwe, C. (2022). Drivers of sustainability accounting and reporting in emerging economics: Evidence from Nigeria Sustainability, 14(7).
Ite, A. E., Ibok, U. J., Ite, M. U., & Petters, S. W. (2013). Petroleum exploration and production: past and present environmental issues in the Nigeria’s Niger Delta. American Journal of Environmental Protection, 1(4), 78-90.
Iwata, H. K., & Okada, K. (2011). How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms. Ecological Economics, 70(9), 1691-1700.
Jalia, J., & Komathy, J. (2019). Sustainability reporting and firm performance: Evidence in Malaysia. International Journal of Accounting, Finance and Business, 4(17), 37-45.
Kadiri-Ikharo, H. L., Ozele, C.E., & Josiah, M. (2024). Environmental accounting disclosure and cost of capital of listed non-financial firms in Nigeria. International Journal of Research Publication and Reviews, 5(8), 754-766.
Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial Management: Principles and Applications (10th ed.). Pearson.
Lindblom, C. (1994). The implications of organizational legitimacy for corporate social performance and Disclosure. Critical Perspectives on Accounting Conference, New York.
Mohammed, A., Alhassan, I., & Mohammed, Y. (2022). Effect of environmental disclosure on financial performance of listed manufacturing firms in Nigeria. International Academic Journal of Economics and Sustainable Development, 8(5), 56-65.
Mohammed, T., & Farouz, P. I. (2014). Does corporate environmental disclosure affect the cost of capital? Evidence from Tunisian companies. Global Journal of Management and Business Research: Accounting and Auditing, 14(1), 1-8.
Mokori, D., & Jagongo, A.(2013). Environmental accounting and firm profitability: An empirical analysis of selected firms listed in Bombay stock exchange India. International Journal of Humanities and Social Science, 3(18), 248-256.
Mulyati, Y. (2017). The influence of voluntary disclosure, stock beta and firm size on cost of Equity Capital. Jurnal Keuangan Dan Perbankan, 21(3), 387-396.
Nguyen, H. A., Nguyen, L. S., & Ha, H. H. (2020). Environmental accounting practices and cost of capital of enterprises is in Vietnam. Congent Economics and Finance 2(8), 1-17.
Nindaya, F., & Dwi, P. (2020). Cost of equity: Disclosure, size, and political connection: Advances in Economics, Business and Management Research, 2(2), 143-156.
Nnamani, J. N., Onyekwelu, U. L., & Ugwu, O. K. (2017). Effect of sustainability accounting and reporting on financial performance of firms in Nigerian breweries sector. European Journal of Business and Innovation Research, 5(1), 1-15.
Nor, N., Bahari, N., Adnan, N., Qamarul, S., Kamal, A., & Ali, I. (2016). The effects of Environmental disclosure on financial performance in Malaysia. Procedia Economics and Finance, 4(35), 117-126.
Ojo, G. (2016). Environmental Justice struggles Ogoni: No more delays clean up now. Environmental impact. A Newsletter of Environmental Rights Action/Friends of Earth Nigeria, 28, 1-15.
Oshiole, B. V., Orbunde, B., & Ame, J. (2024). Employee health and safety cost and effluent disclosure on market value of listed consumer and industrial firms in Nigeria. International Journal of Research and Innovation in Social Science (IJRISS), 7(5), 1-26.
Oshiole, O. O., Elamah, P. O., & Ndubuisi, N. C. (2020). Environmental cost disclosure and profitability of oil and gas firms listed on Nigerian Stock Exchange. Journal of finance and accounting, 8(2), 56-70.
Raimo, N., De Nuccio, E., Giakoumelou, A., Petruzzella, F., & Vitolla, F. (2020). Non-financial information and cost of equity capital: an empirical analysis in the food and beverage industry. British Food Journal, 123(1), 49-65.
Ribeiro, V., & Aibar-Guzman, C. (2010). Determinant of Environmental accounting practices in local entities: evidence from Portugal. Social responsibility Journals, 6(3), 404-419.
Rose, S. A., Westerfield, R. W., Jordan, B. D., & Roberts, G. S. (2019). Fundamentals of corporate finance. McGraw-Hill Education.
Suchman, M. C. (1995). Managing legitimacy: strategic and institutional approaches. The Academy of Management Review, 20(3), 571-610.
Udo, E. J. (2018). Companies financial attributes and environmental accounting disclosures of the oil and gas industry in Nigeria. PhD thesis. University of Uyo Nigeria.
Udomah, M. O., & Emenyi, D. E. O. (2023). Sustainability reporting and financial performance of selected cement firms in Nigeria. GPH-international Journal of Business Management, 6(8), 40-65.
Usman, M. M., & Suleiman, M. (2023). Effect of environmental accounting disclosure on cost of debt capital of lifted non-financial firms in Nigeria. POLAC International Journal of Accounting Management Sciences and Security Studies (PIJAMSS) 5(10), 1-14.
Uwigbe, U. (2011). An empirical examination of the risk associated with corporate social responsibility disclosures and firms size. International Journal of Business Continuity and Risk Management, 2(3), 284-294.
Wang, Q., & Liang, K. (2021). The impact of environmental regulation on firm performance: Evidence from Chinese cement industry. Journal of Environmental Management, 299.
Wara, R. K., Magali, J., & Mohammed, S. (2020). Environmental disclosure and financial performance of firms in Kenya. Research Journal of Finance and Accounting, 11(14), 52-63.
Wendai, L., Jing, Z., & Bin, L. (2022). Does more voluntary environmental information and disclosure cut down the cost of equity: heavy pollution industries in China. Environmental Science and Pollution Research, 29(42), 62913-62940.
Yossi, D. (2018). The mediating effect of sustainability disclosure on financial performance and firm value in Indonesia. Journal of Accounting Finance Auditing Studies, 4(2), 32-48.
Zhao, X., Zhang, L., & Song, Y. (2014). Environmental information disclosure of listed company study on the cost of debt capital empirical data: Based on thermal power industry. Canadian Social Science, 10(6), 88-94.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Felix Osayabor Emovon, Yemisi Bosun-Fakunle, Samuel Osarobo Okunrobo
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
