Effect of Environmental Cost Disclosure on Profitability of Listed Oil and Gas Firms in Nigeria

Abstract

The objective of this study was to ascertain the effect of environmental cost disclosure on profitability of oil and gas firms listed on Nigeria Stock Exchange between 2010 and 2019. Eleven (11) listed oil and gas firms were purposively sampled. The proxies for environmental cost disclosure include waste management cost disclosure, employee health and safety cost disclosure and environmental remediation cost, while net profit margin was employed as profitability measure. Content analysis was employed while Pearson Correlation Coefficient and Panel Least Square (PLS) Regression analysis via STATA 13 statistical software were used to test the hypotheses of the study. The result of this study showed that waste management cost disclosure, employee health and safety cost disclosure and environmental remediation cost disclosure have a significant positive effect on net profit margin at 5% level of significance respectively. This study therefore recommends inter alia that since environmental cost is value relevant in making strategic business decision. Thus, oil and gas firms should constantly reposition their accounting system in order to provide information on environmental cost so that the true costs in an organization can be ascertained and properly allocated.

Keywords: Environmental Cost, Profitability, Remediation Cost