Environmental Disclosure and Profitability: Evidence from Oil and Gas Firms Listed in Nigeria

Abstract

and strategic management towards sustaining the future’. (Isa 2014). These information are seen in notes to the account of annual reports of companies. Ifurueze, Lydon and Bingila (2013) justify incurring environmental cost as a provision of framework to environmental responsibility and corporate financial performance thus, comparing the Abstract: The oil and gas industry of the Nigerian have caused several avoidable environmental degradations to the host communities of the operating firms with the outfits having little or no attention to contributing or incurring much costs to the conservation of these environments for future uses. This study evaluates the relationship between environmental cost disclosure and profitability (performances) of firms in oil and gas industry in Nigeria. Time series data were collected from published annual reports of ten sampled companies for ten years (2010-2019) based on data availability. Ex post facto design was used. Environmental costs were represented in terms of waste management cost, pollution control cost, fines and litigation cost and community development cost while return on assets, ROA, was used as proxy to firm profitability. Pearson product moment coefficient of correlation and multiple regression analysis were used to analyze the data. Econometric result reveals that environmental cost has no significant effect on the performance of oil and gas firms in Nigeria. Information; and Environmental Audit. Time series data were collected from annual financial reports and economic review of Central Bank of Nigeria; Pearson product moment coefficient of correlation and multiple linear regression analysis with the aid of statistical package for social sciences (SPSS) version 22 were used to analyze the data. The econometric results reviewed adequate disclosure on environmental cost, compliance to corporate environmental regulations have positive significant effect on financial performance measures. Thus, the study recommended regulatory enforcement for adequate environmental cost disclosure and proper reporting for independent variables compared along their degree of variation. In a study conducted by Bassey, Effiok, and Eton, (2013) that examines the impact of environmental accounting and reporting an organizational performance with particular reference to oil and gas companies operating in the Niger Delta Region of Nigeria. The study was conducted using the Pearson’s product moment correlation co-efficient. The elements were selected by means of random and stratified sampling technique. Data were gathered from primary and secondary sources. Data collected were presented using tables and analyzed using the Pearson’s product moment co relational analysis. It was found from the study that environmental cost has satisfied relationship with firm’s profitability. It was concluded that environmentally friendly firms will significantly disclose environmental related information in financial statements and reports. The study recommended that firms should adopt a uniform method of reporting and disclosed environmental issues for the purpose of control and measurement of performance and that accounting standards should be published locally and internationally and reviewed continually to ensure dynamism and compliance to meet environmental and situational needs. corporate performance: a and independent variables and Return Total Assets for dependent variable. Multiple regression analysis used to evaluate data obtained from 12 sampled oil companies for a period of 12 years and observed that sustainable business practices significantly positively related with on net profit dividend per (DPS) return on employed earnings per share (P = 0.423), and dividend share performance. The results show that return on asset model shows a coefficient value of 0.708, and a P-value of 0.000. The positive coefficient value indicates that pollution control cost positively affects the performance of firms in the oil and gas sector. This implies that a #1.00 increase in pollution cost will result in #0.71 increase in return on assets and a #0.08. The probability value reveals that pollution control cost has insignificant effect on return on assets. Based on this result, the study accepts the alternative hypothesis and rejects null the hypothesis. It therefore concludes that, pollution control cost has significant effect on performance of firms quoted oil and gas sector of the Nigeria Stock Exchange. This is in line with the findings of Nwaiwu & Oluka (2018) and Ifurueze et al (2013) and contrary to that of Oti & Mbu-Ogar (2018). It also affirms the PPP theory which simply underlies that every polluting firm must replenish the losses and harms they caused the gas