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Environmental Compliance Cost and Financial Performance of Oil and Gas Companies in Nigeria

Ukpeh, Gabriel Ita

Abstract

This study examined the effect of green accounting on the financial performance of oil and gas companies in Nigeria. Voluntary disclosure persists in the context of green accounting and reporting in Nigeria, with many firms not paying sufficient attention to the benefits of timely green reporting on their performance. Given this, the study aimed to determine the effect of environmental compliance costs on the Return on Assets (ROA) of listed oil and gas companies in Nigeria. Ex-post facto research design was adopted, and data for green accounting and financial performance were collected from the financial statements and sustainable report of nine (9) oil and gas firms listed in the Nigerian Exchange (NGX) Group as of 2023 for ten (10) years (2014-2023). Financial performance was measured by ROA, while green accounting was measured by environmental compliance costs (ECC). The data collected were analyzed using Distributed Lag Model (DLM) regression to show the short- and long-term effects of environmental compliance costs (ECC) on ROA. The findings showed that environmental compliance costs have a short-term positive effect (Coeff. =0.10; t-stat = 1.02) and a long- term negative effect (Coeff. = -1.39; t-stat = -1.19) on ROA of oil and gas firms. In conclusion, environmental compliance costs have a mixed effect on the financial performance of oil and gas companies in Nigeria, as they have a positive effect in the short term and a negative effect in the long term. Recommendations include that oil and gas companies should implement green accounting initiatives that strictly adhere to environmental compliance to enhance their financial performance.

Keywords

Green AccountingEnvironmental Compliance CostReturn on Assets (ROA)

References

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