Environmental Cost and Firm Value of Listed Firms in Nigeria

The growing emphasis on environmental accountability and sustainability has increased investors’ attention to how firms manage environmental expenditures. Emerging economies such as Nigeria shows limitations in how capital markets assess different components of environmental costs. This study therefore examines the effect of environmental cost on the firm value of listed firms in Nigeria. Using an ex-post facto research design, the study relies on secondary data extracted from the annual reports of selected firms. The population comprised thirteen industrial goods listed firms, out of which ten firms were sampled. Ordinary Least Squares (OLS) regression was used to evaluate the relationship between environmental cost components and firm value, measured by Tobin’s Q. Environmental cost was decomposed into prevention, monitoring, and remediation costs to capture their distinct effects on valuation. Findings show environmental prevention cost and environmental monitoring cost exert positive and statistically significant effects on firm value. Therefore, proactive environmental investment and credible monitoring practices signal strong governance and sustainability. In contrast, environmental remediation cost has a significant negative effect on firm value, indicating that reactive spending is viewed as a sign of environmental risk exposure and weak governance. The study concludes that environmental cost affects firm value in Nigeria only when the cost elements are analysed separately, as aggregate measures can mask important valuation insights. It recommends improved regulatory disclosure on environmental costs, stronger managerial focus on preventive and monitoring investments and greater integration of environmental costs into investment and valuation decisions to enhance sustainable value creation.