Evaluating the Impact of Environmental Costs on the Market Values of Oil and Gas and Communication Firms in Nigeria

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• November 28, 2023
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Felicia Cheluchi Iyidiobi-Agaba PhD¹, Prof. Ifeoma Mary Okwo², & Festus Ndubuisi Nkwo^3
12Department of Accountancy, Enugu State University of Science and Technology (ESUT), Enugu State, Nigeria
³Department of Accountancy, Gregory University Uturu, Abia State, Nigeria

Abstract This study evaluates the impact of Environmental Cost on Market Value of publicly listed oil and gas and communication firms in Nigeria. The specific objectives are to assess the impact of environmental investment costs on market capitalization, examine the impact of environmental remedial costs on market capitalization and determine the impact of environmental law compliance and penalty costs on market capitalization of publicly listed oil and gas and communication firms in Nigeria. The study adopted an ex-post-facto research design which made use of secondary data obtained from the annual reports and accounts of the selected oil and gas, and communication firms under study. The period for the study spanned from 2007 to 2021. The study utilized the Ordinary Least Squares (OLS) multiple regression model for data analysis. The analysis results indicated a positive and significant impact of environmental investment costs on the market capitalization of the selected oil and gas and communication firms in Nigeria. However, environmental remediation costs were found to have a negative and nonsignificant effect on market capitalization. Conversely, environmental law compliance and penalty costs exerted a significant and positive influence on the market capitalization of these selected firms in the oil and gas and communication sectors in Nigeria. The implication of these findings underscores the importance of integrating environmental investment costs into the strategic considerations of publicly listed oil and gas and communication firms in Nigeria, as it positively affects their market capitalization. Furthermore, the research highlights the need for prudent management of environmental remedial costs and demonstrates the potential benefits of strong environmental law compliance and penalty cost adherence on market capitalization in these industries. In conclusion, this study underscores the growing importance of environmental considerations in the financial performance of oil and gas and communication firms. Companies that prioritize environmental investments and compliance may experience enhanced market values. On the other hand, overlooking environmental remediation costs can potentially hinder market capitalization. Recommendations stemming from these findings include urging firms to invest in environmentally responsible practices, adhere to environmental laws, and consider innovative strategies to mitigate and remediate environmental damage. By doing so, these companies can secure their financial well-being while contributing to a sustainable future. Keywords Environmental Costs; Investment Costs; Remedial Costs; Law Compliance Cost and Market Value Citation Iyidiobi-Agaba, F. C., Okwo, I. M. & Nkwo, F. N. (2023).  Evaluating the Impact of Environmental Costs on the Market Values of Oil and Gas and Communication Firms in Nigeria. International Journal of Advanced Finance and Accounting, 4(5), 1-16 https://doi.org/10.5281/zenodo.10207109