Environmental Cost Disclosure and Its Impact on Firm Profitability in Nigeria

This study investigates the relationship between environmental cost disclosure (ECD) and firm profitability (FP) among Nigerian listed firms from 2010 to 2024. Utilizing stakeholder and legitimacy theories as theoretical foundations, the study employs an ex-post facto research design with panel regression analysis on 148 firms. Environmental cost disclosure is measured using an index-based approach capturing waste management costs, pollution control expenditures, and environmental remediation provisions, while firm profitability is proxied by return on assets (ROA). Control variables include firm size, leverage, growth opportunities, firm age, and liquidity. Findings reveal a statistically significant positive relationship between environmental cost disclosure and firm profitability (β = 0.284, p < 0.01), suggesting that transparent environmental cost reporting enhances operational efficiency and stakeholder confidence. The results remain robust after controlling for endogeneity and conducting post-estimation diagnostics. The study contributes to the sustainability accounting literature by providing evidence from a developing economy context where regulatory enforcement varies. Recommendations include mandating standardized environmental cost reporting frameworks and encouraging substantive rather than symbolic disclosure practices.