2023 PUBLICATION

EFFECT OF ENVIRONMENTAL ACCOUNTING DISCLOSURE ON COST OF DEBT CAPITAL OF LISTED NON-FINANCIAL FIRMS IN NIGERIA

Abstract

Over the course of the last few years, there has been a growing recognition of the importance of environmentally sustainable business practices and responsible corporate behavior. As a result, environmental accounting disclosure has emerged as a critical aspect of corporate reporting, presenting information on a company's environmental performance and practices. Understanding the impact of environmental disclosure on financial outcomes, such as the cost of debt, is crucial for both companies and financial stakeholders. This study focuses on the effect of environmental accounting disclosure on the cost of debt of listed non-financial firms in Nigeria. Nigeria The study adopts an ex-post facto research design, utilizing data from a sample of 78 non-financial firms over 10 years (2012-2021). To analyze the data, the study employs a panel regression technique, which considers both cross-sectional and time-series variations in the data. Controlling for firm size and profitability, the study aims to isolate the specific impact of environmental disclosure on the cost of debt. The findings of the study reveal a significant positive effect of environmental disclosure on the cost of debt. This implies that companies disclosing more information on their environmental practices tend to face higher borrowing costs. The study recommends that the non-financial firms should adopt a proactive approach in addressing potential environmental risks and challenges by implementing effective risk management strategies. Companies can showcase their dedication to minimizing uncertainties that could affect their financial well-being by engaging in the identification, evaluation, and mitigation of environmental risks. Companies that have strong risk management practices may be perceived more positively by lenders and creditors. This positive perception could potentially ``````result in decreased apprehension regarding the higher debt costs associated with environmental accounting disclosures.

Keywords: Environmental accounting disclosure, cost of debt capital, size, and profitability

Authors:

Musa Musa Usman (PhD)
Mamman Suleiman