Research Objective: This study examined the effect of environmental costs accounting on the earnings performance of oil and gas firms in Nigeria. Specifically, it evaluated the impact of environmental costs on retained earnings, earnings per share, and return on assets in oil and gas firms.
Methodology: A sample of three firms was selected from a population of eleven oil and gas firms listed on the Nigerian Stock Exchange during the study period. Secondary data were collected from the annual reports of these firms and analyzed using multiple regression analysis to assess the relationship between environmental costs and earnings performance.
Findings: The analysis revealed that environmental costs have a positive but insignificant effect on retained earnings of oil and gas firms in Nigeria. It was also found that environmental costs have a negative and insignificant effect on earnings per share. However, environmental costs were found to have a positive and significant effect on return on assets.
Conclusion: Environmental costs play a role in influencing the return on assets of oil and gas firms, although their impact on retained earnings and earnings per share was less significant. Firms that effectively manage environmental costs could see improved asset returns, but the broader effect on earnings performance remains inconclusive.
Recommendation: Firms should adopt uniform reporting and disclosure standards for environmental practices to enable better control and performance measurement. Smaller firms should be encouraged to disclose their environmental practices in annual reports, as this could enhance their competitiveness and contribute to better corporate performance. Furthermore, top management should ensure compliance with environmental laws, as this will foster sustainability and enhance long-term performance.
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