Environmental Costs and Firm Value of Listed Firms in Nigeria: Evidence from Net Asset Per Share

This paper discusses the existence of environmental costs in defining value of firms listed in Nigeria applying Net Asset Per Share (NAPS) as the fundamental valuation measure. The research is inspired by ongoing discussion in the environmental accounting academic literature: one school of thought argues that environmental commitments incur costs that undermine competitiveness, another that environmental commitments lead to improved reputation, stakeholder support, and long-run value, and a third finds ambivalent or nonlinear outcomes. The study based on a purposive sample of 25 listed firms observed during 2012-2018 operationalizes environmental costs such as Research and Development Cost (RDC), Community Development Cost (CDC) and Employee Health and Safety Cost (EHSC). The article results in the statistically significant joint effect of the environmental costs on the NAPS, which is obtained with the help of the panel-data procedures, reported in the dissertation, which are descriptive statistics, correlation analysis, unit-root and cointegration diagnostics, Granger-causality tests, the Hausman test, and the random-effects estimation. More particularly, CDC is positively and significantly related to NAPS and EHSC is positively related, though not significantly. The diagnostic evidence also indicates that NAPS and the environmental-cost series commove, on long-run basis and Granger-causality results show that CDC is the sole environmental-cost proxy that predicts NAPS. The paper maintains that the Nigerian marketplace seems to more readily reward observable community involvement than internally focused spending and nonetheless appreciates environmental costs as a source of value. The results add value to the body of literature by offering multi-sector evidence in Nigeria and by dividing environmental cost into three tangible items as opposed to taking one aggregate measure.