EFFECT OF ENVIRONMENTAL COST AND LIABILITY RECOGNITION ON FINANCIAL REPORTING QUALITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study examined the effect of environmental cost and liability recognition on the financial reporting quality of listed deposit money banks in Nigeria. Specifically, it investigated how environmental cost recognition quality and environmental liability recognition and measurement influenced the reliability, transparency, and sustainability of reported earnings. The study employed an ex post facto research design, using panel data from fourteen listed banks over the ten-year period 2015–2024. A census sampling technique was adopted, and data were extracted from annual reports and financial statements. The analysis was conducted using descriptive statistics, correlation analysis, variance inflation factor, Breusch-Pagan heteroskedasticity test, Hausman specification test, and fixed effect regression modelling. Findings revealed that both environmental cost recognition and environmental liability recognition exerted positive and statistically significant effects on financial reporting quality. The results indicated that systematic recognition of environmental costs and accurate measurement of environmental obligations enhanced accrual quality, earnings persistence, and balance sheet integrity. The study concluded that environmental recognition is a key determinant of financial reporting quality and recommended that banks institutionalise robust frameworks for environmental cost and liability recognition, supported by regulatory guidance and auditor verification, to strengthen reporting reliability.