ABSTRACT
This study examined The Effect of Triple Bottom Line Accounting on the Performance of Listed Manufacturing Firms in Nigeria. The sample comprises 40 manufacturing firms listed on the Nigerian Stock Exchange (NSE), covering the period of 2015 to 2019. The combination of 40 firms for a five year period provides a balanced panel of observation, which were analyzed using a cross-sectional and ex-post facto research design. Triple Bottom Line Accounting measures proxies are, economic cost, social cost, and environmental cost. Performance measures proxies are, Earnings Per Share, Market Value Per Share, Tobins Q Ratio, Net Asset Value Per Share, and Economic Value Added. The postulated hypotheses were tested, using panel least square method of Multiple Regression Analysis. Multiple regression analysis 1 shows F-Statistics outcome of 0.626473. Multiple regression analysis 2 shows r-squared outcome of 0.000151. Multiple regression analysis 3 shows R-square of 0.025613 Multiple regression analysis 4 shows Adj(R2) of 0.124100, Multiple regression analysis 5 shows f-statistics is 0.589283, all supporting the credibility of regression equation and powers of the independent variables in predicting changes that occur in the Performance of manufacturing firms in Nigeria. Based on this, we accept that the various indicators of Triple Bottom Line Accounting, in this research work, jointly have significant influence on the Performance of Listed Manufacturing Firms in Nigeria since the residual statistics indicate that the regression model is properly fitted. We recommended that government should help to put in place some guidelines for manufacturers to contribute to their environment and the society at large. Business management and managers should adopt triple bottom line as a guide to report to stakeholders on the allocation of benefits not only to shareholders but to other stakeholders.
TABLE OF CONTENTS
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of contents vi
List of tables x
Abstract xii
CHAPTER 1: INTRODUCTION 1
1.1 Background
to the Study 1
1.2 Statement
of the Problem 3
1.3 Objectives
of the Study 4
1.4 Research
Questions 5
1.5 Research
Hypotheses 5
1.6 Significant
of the Study 6
1.7 Scope of
the Study 7
1.8 Operational
Definition of Terms 8
CHAPTER 2: REVIEW OF RELATED LITERATURE 10
2.1
Conceptual Review 10
2.1.1 Triple
bottom line accounting 10
2.1.2 Application
of triple bottom line 14
2.1.3 How
triple bottom line can be measured 18
2.1.4 The
concept of environmental accounting 24
2.1.5 Problem
of environmental accounting 27
2.1.6 Need
for sustainability accounting 28
2.1.7 Measurement
of social contribution 30
2.1.8 Social
and environmental accounting 31
2.1.9 The
social contract concept 32
2.1.10 Nature
and scope of social and environmental accounting disclosure 33
2.1.11 Emergence
of social and environmental accounting 36
2.1.12 Financial
performance of firms 40
2.2 Theoretical
Review 43
2.2.1 Stakeholder
theory 44
2.2.2 Institutional
theory 51
2.2.3 Agency
theory 59
2.2.4 Stewardship
61
2.3 Empirical
Review 63
2.4 Summary
of Empirical Review 79
2.5
Summary and Gap 82
CHAPTER 3: METHODOLOGY 84
3.1 Research
Design 84
3.2 Population
of the Study 82
3.3 Sampling
Procedure and Sample Size Determination 85
3.4 Nature
and Source of Data 85
3.5 Description
of Research Variable 85
3.6 Data
Analysis Techniques 86
3.7 Model
Specification 87
CHAPTER 4: RESULTS AND DISCUSSION 91
4.1 Analysis
of consumer goods 91
4.1.1 Descriptive
analysis of consumer goods 91
4.1.2 Panel
unit root test result 94
4.1.3 Panel
co-integrated analysis results 96
4.1.4 Granger
causality test 97
4.1.5 Discussion
of consumer goods regression results 100
4.2 Analysis
of Industrial Goods 104
4.2.1 Panel
unit root test for industrial goods 107
4.2.2 Panel
co-integration test for industrial goods 109
4.2.3 Granger
causality test 110
4.2.4 Discussion
of industrial goods regression results 113
4.3 Analysis
of Natural Resources Goods 118
4.3.1 Descriptive
data analysis for natural resources goods 118
4.3.2 Panel
unit root test for natural resources goods 121
4.3.3 Panel
co-integrated analysis 123
4.3.4 Granger
causality test for natural resources goods 125
4.3.5 Discussion
of natural resources goods regression results 128
4.4 Analysis
of Agriculture Products 133
4.4.1 Descriptive
analysis for agricultural products 134
4.4.2 Panel
unit root test for agricultural products 136
4.4.3 Panel
co-integration analysis 139
4.4.4 Granger
causality test for agricultural products 140
4.4.5 Discussion
of agricultural product sector regression result 143
4.5 Analysis
of Healthcare Product 147
4.5.1 Descriptive
analysis of healthcare product 147
4.5.2 Panel
unit root test for healthcare product 151
4.5.3 Panel
co-integration analysis 152
4.5.4 Granger
causality test for healthcare product 155
4.5.5 Discussion
of healthcare product regression result 160
4.6 Analyses of
all the listed manufacturing firms 162
4.6.1 Descriptive analysis for all listed
manufacturing firms 162
4.6.2 Granger
causality test for all manufacturing firms in Nigeria166
4.7
Test of Hypotheses 171
4.7.1
Hypothesis I 171
4.7.2
Hypothesis ii 174
4.7.3
Hypothesis iii 176
4.7.4
Hypothesis iv 179
4.7.5
Hypothesis v 181
CHAPTER
5: SUMMARY, CONCLUSION AND RECOMMENDATIONS
183
5.2 Summary
of Findings 183
5.3 Conclusion 185
5.4 Recommendations 185
References 187
Appendices 200
LIST OF TABLES
2.1 Summary of Empirical Review 79
4.1 Result
of Descriptive Analysis 91
4.2 Panel
Unit Root at level 94
4.3 Panel
Unit at first Differencing 95
4.4 Panel
Co-integration Test for Consumer Goods 96
4.5 Granger
Causality Test Result 98
4.6 Hausman
Test for Fixed and Random Effects Model 101
4.7 Panel Multiple Regression
of Triple Bottom Line on
Consumer goods 102
4.8
Result of Descriptive Analysis on
Industrial Goods 105
4.9 Panel Unit Root at Level 107
4.10 Panel Unit Root at First Differencing 108
4.11 Panel
Co-integration Test for Industrial Goods 109
4.12 Granger Causality Test Result for
Industrial good 111
4.13 Hausman
Test for Fixed and Random Effects Models 113
4.14 Panel
Multiple Regression of Triple Bottom Line on
Industrial Goods 116
4.15 Result of Descriptive Analysis of Natural
Resource Goods 118
4.16 Panel Unit Root Result at Level 121
4.17 Panel Unit Root at First Differencing 122
4.18 Panel
Co-integration Test Result for Natural Resource Goods 123
4.19 Granger Causality Test for Natural
Resource Goods 126
4.20 Hausman Test Result for Natural Goods
Regression 129
4.21 Multiple Regression of Triple Bottom Line
on Natural
Resource Goods 130
4.22 Result of Descriptive Analysis of
Agricultural Product 134
4.23 Panel
Unit Root Result of Level 137
4.24 Panel
Unit Root at First Differencing 138
4.25 Panel
Co-integration Test Result for Agricultural Product 139
4.26 Granger
Causality Test for Agricultural Product 141
4.27 Hausman
Test Result for Agricultural Product 144
4.28 Panel
Multiple Regression TBL on Agricultural Product 145
4.29 Result
of Descriptive Analysis of Healthcare 148
4.30 Panel
Unit Root Result of Level 151
4.31 Panel
Unit Root at First Differencing 152
4.32 Panel
Co-integration Test Result for HCP 154
4.33 Granger
Causality Test for Healthcare Product 155
4.34 Hausman
Test Result for Healthcare Product 158
4.35 Panel
Fixed Effect Multiple Regression
160
4.36 Result of Descriptive Analysis for all
manufacturing firms 162
4.37 Granger
Causality Test for all manufacturing firms 167
4.38 Panel Multiple Regression of EPS 172
4.39 Panel Multiple Regression of MVPS 174
4.40 Panel Multiple Regression of TQR 176
4.41 Panel Multiple Regression of NAVPS 179
4.42 Panel Multiple Regression of EVA 181
CHAPTER
1
INTRODUCTION
1.1
BACKGROUND
TO THE STUDY
Business is a socio-economic activity
and it draws its inputs from the society. Hence, its objectives should include
the welfare of the society (Abbot & Monsen, 2009).
Business therefore, owes a responsibility towards solving many social problems.
Triple bottom line accounting is a broader frame work that incorporates three
dimensions of performance which include economic, social and environmental
accounting (Onyali, 2014). The same can be said of sustainability reporting
which is regarded as the integration of economic, social and environmental
reporting (Middle-Brooks, Miltenberger, Tweedy, Newman & Follman 2009 in
Piper, Mang, Knox & Waddel, 2012). The triple bottom line accounting of
social, economic and environmental reports considerably alters how
organizations and stakeholders measure sustainable success.
Triple Bottom Line Accounting refers
to a method of measuring the economic, environmental and social equity impacts
of an organization rather than the traditional practice of measuring just the
financial bottom line. Elkington (1997) coined 'triple bottom line’ as a new
term to advance sustainability agenda. His definition of Triple Bottom Line
used the terms profit, people, and the planet as the three lines. In this
study, the economic, social and environmental lines refer to profit, people,
and planet respectively. Sustainable development involves the pursuit of
economic prosperity, environmental quality, and social equity. Companies aiming
for sustainability need to perform, for not only a single financial bottom
line, but for the triple bottom line. Triple Bottom Line is intended to go
beyond previous construction of sustainable development and corporate social
responsibility to encompass an approach that emphasizes economic prosperity,
social development and environmental quality as an integrated method of doing business
(Elkinton, 2004). This definition implies a shift away from the emphasis of
organizations on short-term financial goals to long-term social, environmental
and economic impacts.
Ngwakwe and Collins (2008) reported
that triple bottom line accounting has a capacity for long-term financial
performance, investment return, and also value creation which refers to
achieving sufficient profits. Companies that are apathetic to their
environmental responsibility might experience eventual crashes on their stock
price if their investors are rational in considering the future value of the
firm based on its present state of environmental responsibility. One
of the best ways of evaluating a sector’s performance is by the use of ratio
analysis like Tobins Q ratio, earnings per share, market value per share, net
asset value per share and economic value added
(Saeed, 2017). Performance
principally reflects business sector outcomes and results that show overall
financial health of the sector over a specific period of time. It indicates how
well an entity is utilizing its resources to maximize the shareholders’ wealth
and profitability. However, a complete evaluation of a firm’s performance takes
into account other measures.
Slaper and Hall (2011)
argued that looking to Triple Bottom Line sustainability, the economic measures
are money-related figures in an organization, such as fund employed in
generating income. The environmental measures are the potential influences of
business environmental impacts on natural resources and their viability. This
would incorporate the contamination impact of water and air quality, greenhouse
gas emissions, material recycling rates, water consumption, energy consumption,
pollutant gases and substances, waste management of hazards,
landfill and material waste management. The social dimension measures
incorporate education level in the local community, equity level, welfare,
careers retention, charitable contributions, level of health care and
well-being, rate of unemployment, quality of life, per capita, violent crimes,
relative poverty, and social capital. In brief, the firm‘s stakeholders are the
right parties to determine the appropriate set of Triple Bottom Line
sustainability measures applicable to subjected business tasks and activities
that would remain flexible and dynamic during changes in business
circumstances.
Many organizations are becoming
increasingly interested in social and environmental sustainability programs
which have the capacity to improve performance to a firm even in the long run.
It is for this reason that this study examined the effect of Triple Bottom Line
Accounting on the performance of listed manufacturing firms in Nigeria.
1.2
STATEMENT
OF THE PROBLEM
Triple bottom line accounting deals with
economic, social and environmental information in corporate annual reports. The
challenge confronting the listed manufacturing companies while adopting the
triple bottom line approaches as their corporate philosophy is the difficulty
in stating key issues to be tackled in their triple bottom line reports,
because it has not been stated as a statute in any acts guiding corporations in
Nigeria. Consequently, the use of triple bottom line reporting has raised
doubts as to the effect it has on the performance of companies in Nigeria
(Aktaruddin, 2005).
Triple
Bottom Line encounters the challenges of how to make an index that is both
comprehensive and meaningful and how to identify suitable data for the variables that compose the index. The
Genuine Progress Indicator (GPI), for example, consists of variables that
encompass economic, social and environmental factors. Those variables are
converted into monetary units. Though
academics agree on the definition of Triple Bottom Line the challenge and real
trick is how to measure it, as the three domains do not have a common
measurement unit (Slaper & Hall, 2011).
Emerging nations are under pressure
to improve their quality of corporate reporting (Ali, 2002). The incessant
changes in the global business and reporting environment and the new
developments and updates in the local and international accounting standards in
addition with changes in corporate structure and legislations, require constant
update in the disclosure of economic, social and environmental information of
corporate organizations.
The interest in reporting accounts in a triple
bottom line has inspired this research to look at actionable knowledge that
would amount to an efficient and robust remedy for performance of listed
manufacturing firms in Nigeria for now and in the future.
1.3
OBJECTIVES OF THE STUDY
The main objective of the study is to
ascertain the effect of triple bottom line accounting on performance of listed
manufacturing firms in Nigeria. The specific objectives are as follows:
i.
To determine the effect
of economic cost, social cost and environmental cost on earnings per share of
listed manufacturing firms in Nigeria.
ii.
To detect effect of
economic cost, social cost and environmental cost on market value per share of
listed manufacturing firms in Nigeria.
iii.
To ascertain effect of
economic cost, social cost and environmental cost on Tobins Q ratio of listed
manufacturing firms in Nigeria.
iv.
To determine effect of
economic cost, social cost and environmental cost on net asset value per share
of listed manufacturing firms in Nigeria.
v.
To examine effect of
economic cost, social cost and environmental cost on economic value added of
listed manufacturing firms in Nigeria.
1.4
RESEARCH QUESTIONS
Based on the objectives of the study,
the researcher seeks answers to the following research questions:
i. To
what extent do economic cost, social cost and environmental cost affect
earnings per share of listed manufacturing firms in Nigeria?
ii. How
do economic cost, social cost and environmental cost affect market value per
share of listed manufacturing firms in Nigeria?
iii. In
which way do economic cost, social cost and environmental cost affect Tobins Q
ratio of listed manufacturing firms in Nigeria?
iv. How
do economic cost, social cost and environmental cost affect net asset value per
share of listed manufacturing firms in Nigeria?
v. In
what ways do economic cost, social cost and environmental cost affect economic
value added of listed manufacturing firms in Nigeria?
1.5
RESEARCH HYPOTHESES
Five hypotheses are formulated to achieve the research objective of the
various parameters.
The hypotheses are hereby stated in the null forms
Ho1: There is no
significant effect of economic cost, social cost and environmental cost on earnings per
share of listed manufacturing firms in Nigeria.
Ho2: Economic cost, social
cost and environmental cost have no significant effect on market value per share of listed
manufacturing firms in Nigeria.
Ho3: Reporting the
economic cost, social cost and environmental cost have no significant effect on Tobins
Q ratio of listed manufacturing firms in
Nigeria.
Ho4:
There is no significant effect of economic cost, social cost environmental cost on asset value per share of listed manufacturing
firms in Nigeria.
Ho5: economic cost, social
cost and environmental cost have no significant effect on economic value added of listed manufacturing
firms in Nigeria.
1.6
SIGNIFICANCE OF THE STUDY
The
study will be significant to government, as they are the main custodian and protector
of the society and the environment. This study will help government to put in
place some guidelines for manufacturers to contribute to their environment and
the society at large.
Investors
have this competitive nature that measures their performance and how to remain
in business for a longer time, therefore, responsiveness to the environment and
the society at large will help them in their investment decisions.
Business
management and managers will benefit from this study as it will guide them on
how to report to stakeholder on the allocation of benefits not only to
shareholders but to other stake holders, regulatory bodies, educators,
researchers, accountants, auditors and scholars particularly in the field of
accounting.
This research also seeks to make theoretical
and practical contributions to the field of accounting in the area of economic,
social and environmental information in respect to financial performance of
manufacturing firms in Nigeria. It will, therefore, definitely enhance the
quality of literature in the field of accounting in Nigeria. Furthermore
researchers in this field will benefit from the study because it can serve as a
bench mark for future research on reporting of economic, social and
environmental information and its effects on financial performance of
manufacturing firms in Nigeria. This study throws more light and adds to
understanding on the reporting of economic, social and environmental
information practices and its implications on financial performance which would
be of advantage to educators and students.
With the outcome of this research,
the regulatory authorities, such as the Financial Reporting Council (FRC),
Nigeria Stock Exchange (NSE) and Securities and Exchange Commission (SEC) would
be able to issue out necessary compliance directives and improve their
compliance monitoring mechanisms to ensure a reasonable level of compliance by
all companies.
1.7
SCOPE OF THE STUDY
In carrying out this research work,
we examine its scope in three terms, geographical scope, content scope and
study unit scope or level of analysis.
i.
The Geographical Scope:
We study manufacturing firms listed on the Nigeria stock exchange and their
annual reports. Examination, assessment and evaluation is done on the published
financial statements of these companies which is divided into consumer goods
product, health care goods product,
industrial goods product, and agricultural goods products, from 2015 to 2019, the baseline of 2015 is
because most manufacturing firms in Nigeria have five years financial
statement. This enables the researcher to look at the economic, social and
environmental variables of the manufacturing firms and make appropriate
recommendations.
ii.
The Content Scope: The
theoretical area that was covered in this study includes Triple Bottom Line
Accounting with focus on economic, social and environmental reporting and their
respective effects on earnings per share, market value per share, Tobins Q
ratio, net asset value per share and economic value added, as variables of the
performance of these firms.
iii.
Study Unit Scope: The
analysis unit is based on the organization level because the study focuses on
listed manufacturing firms.
1.8
OPERATIONAL DEFINITION OF TERMS
Environmental
Accounting: The three distinct meanings of
environmental accounting are as follows. In the context of national income
accounting, it refers to natural resource accounting. This entails statistics
about a nation’s consumption of natural resources. It also takes into account
the extent, quality and valuation of natural resources, which are either
renewable or non-renewable.
Fund
Employed: Also known as capital employed, this is
the total amount of capital used for the acquisition of profits. Ready Ratio
(2018) states that, fund employed is the value of all the assets employed in a
business, and can be calculated by adding fixed assets to working capital or by
subtracting current liability from total assets (Hayes, 2018).
Social
responsibility reporting: This explains the set
goals of organizational activities that deal with the measurement and analysis
of the social and environmental performance of an organization and the
reporting of such results to concerned groups, both within and outside the
organization.
Social
Accounting: This is an aspect of accounting that
deals with the reporting of those costs and benefits which may or may not be
quantifiable in monetary terms, arising from economic activities and
substantially borne or received by the community at large or particular groups
not holding a direct relationship with the reporting entity.
Triple
bottom line accounting: This is an accounting
framework with three parts, social, environmental and financial (economic) to
create greater business value.
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