Environmental Accounting and Value Relevance of Accounting Information: Time Series Evidence from Nigeria Commercial Banks

This paper examined the relationship between environmental accounting and value relevance of accounting information of commercial banks in Nigeria.Time series data of the variables used in the research was collected from financial statement of the commercial banks. The study had equity prices and earnings per share as the function of cost of donations, cost of wages and salaries, cost of environmental expenditure and cost of human resource development. The Ordinary Least Square (OLS) method of data analysis with multiple regressions was used in the study. In determining the long-run relationship, stationary and causal relationship that exists among the variables, cointegration, Augmented Fuller Unit Root and Pair wise Causality was used. The static regression result found that the independents variables have positive relationship with the dependent variables excerpt cost of human capital development. The cointegration test revealed at least two cointegrating equation, the stationarity test revealed that the variables are stationary at level while the granger causality test proved no directional relationship. The study conclude that environmental accounting have significant relationship with value relevance of accounting information in Nigeria commercial banks. We recommend that all environmental cost should properly be reported and accountants should ensure well accountability of human capital development.

circulation cost, Cost for efficient utilization of resources, Administrative cost, Social activities cost, Environmental remediation cost and other costs.
Environmental Accounting can be used both in accounting and management which can relate to environmental performance then the information can be forwarded to both internal and external stakeholders in organization. Graff et al, (1998) noted that environmental accounting is a broad based term that refers to the incorporation of environmental costs and information into a variety of accounting practices. It is a growing field that identifies measures and communicates costs from a company's actual or potential impact on the environment (Okafor, 2010). Environmental accounting can be considered either as a subset or superset of accounting proper, because it aims to incorporate both economic and environmental information. It provides reports for both internal use, generating environmental information to help make management decisions on pricing, controlling overhead and capital budgeting, and external use, disclosing environmental information of interest to the public and to the financial community. Internal use is better termed environmental management accounting (Bartolomeo et al, 2000).
The qualitative management of environmental conservation activities is a component of corporate social responsibility and an effective way of achieving and maintaining sound business management. The process of environmental conservation activities, a company or other organizations can accurately identify and measure investments and costs related to environmental activities. By having better insight into the potential benefit of these investments and costs, the company can not only improve the efficiency of its activities but have leverage over factors that affect negatively performance of corporate organizations. Environmental accounting also plays a very important role in supporting rational decision making. Companies and other organizations are required to have accountability to stakeholders, such as consumers, business partners, investors and employees, when utilizing environmental resources such as public goods, for their business activities. Disclosure of environmental accounting information is a key process in performing accountability. Consequently, environmental accounting helps companies and other organizations boost their public trust and confidence and are associated with receiving a fair assessment.
Value relevance of accounting information addresses the degree to which accounting information summarizes the information that is impounded in share prices. Accounting information is considered relevant if the information disclosed by financial statements to capture and summaries firm value. It is a statistical measure of information presented in the financial statement and stock market value or return. The protection of the environment and the potential involvement of accountant is becoming a common subject of discussion among accountants all over the world. Environmental accounting have significant effect on financial statement such as cash accounting prepares on cash basis of accounting, accrual accounting prepare in accrual bases that can affect the value relevance of accounting information such as equity price and earnings per share of quoted firms, it therefore imperative to examine how it affects the value relevance of commercial banks in Nigeria.

Statement of the Problem
The financial market is characterized with information that can affect the value of the corporate organizations; this led to the formulation of theory of information known as information asymmetric. The efficient market hypothesis recognizes the affect of past, private, environmental and public information on the stock prices of historical forms. The traditional accounting system of corporate organization does not recognize environmental accounting,this means that accounting does take into consideration the cost of business activate on the environment. The neglect of environmental accounting has resulted incorrect treatment of fixed capital and natural capital as the former depreciates when use in production while the later does not (Sayedeh and Saudah, 2014). The disclosure of environmental accounting information as one of the key element in an environmental  (Okoye and Ezefiofor, 2013;Bassey et al, 2014;Magana et al, 2014). Therefore this study examined the effect of environmental accounting on value relevance of accounting information in Nigeria commercial banks.
From the above research problem, the following research objectives are formulated:  To examine the effect of tax cost on the value relevance of accounting information  To examine the effect of environmental expenditure cost on the value relevance of accounting information  To examine the effect of wages and salaries of staff on the value relevance of accounting information  To examine the effect of cost of human capital development on the value relevance of accounting information  To examine the effect of cost of donation on the value relevance of accounting information

Research Questions
 What is the effect of tax cost on the value relevance of accounting information?
 What is the effect of environmental expenditure cost on the value relevance of accounting information?
 What is the effect of wages and salaries of staff on the value relevance of accounting information?
 What is the effect of cost of human capital development on the value relevance of accounting information?
 What is the effect of cost of donation on the value relevance of accounting information?  . It can more accurately be identify as the true costs by clarifying the activities which are prerequisite for corporate performance. These accounting procedures allow a company to identify the cost of environmental conservation during the normal course of business, identify benefit gained from such activities, and provide the best possible means of quantitative measurement and support the communication of its results.

Research
It provides a common framework for organizations to identify and account for past, present and future environmental costs to support managerial decision-making, control and public disclosure (KPMG and UNEP, 2006 These are costs which are related to environmental conservation activities that a company may carry out as a part of its social activities but not directly related to its business activities.  Cost for environmental improvement activities, including nature conservation, planting of greenery, beautification and landscape preservation, with the exception of the business site or surrounding vicinity  Cost related to donation or financial support of environmental groups  Cost associated with various social activities, such as the financial support of a local community's environmental conservation activities and the disclosure of information to the local community  Environmental Remediation Cost These contingent costs are allocated for recovery of the environmental degradation due to business activities.  Cost to restore the natural environment back to its original state  Cost to cover degradation suits connected with environmental conservation  Provisions or insurance fees to cover degradation to the environment  www.cribfb.com/journal/index.php/ijafr public interest groups and governmental bodies. The major objective of the firm is to attain the ability to balance the conflicting demands of the various stakeholders in the firm. The stakeholder approach to analysis is well established in the management (and accounting) literature (Roberts, 1992). Its essence is the definitions of all those groups or parties who are influenced by the organization. From this point on, stakeholder theory struggles to maintain anything other than an organization centered legitimacy because while the groups may be defined with a fair degree of objectivity. Stakeholder theory, therefore, is concerned typically with how the organization manages its stakeholders. Thus the information disclosed to the stakeholders may be assumed more properly by the organization to be part of a legitimacy and/or social process.

 Legitimacy Theory
Legitimacy theory, like a number of other theories such as political economy theory and stakeholder theory, is considered to be a systems-oriented theory. Within a systems-oriented perspective, the entity is assumed to be influenced by, and in turn to have influence upon the society in which it operates (Watts et al., 1986). Corporate disclosure policies and practices are considered to represent one important means by which the management can influence external perceptions about their organizations. The idea of legitimacy can be directly related to the concept of a social contract, consistent with the view that organizations are part of a broader social system, legitimacy theory assumes that organizations are not considered to have any inherent right to resources, or in fact, to exist. Organizations exist to the extent that the particular society considers that they are legitimate, and if this is the case, the society confers upon the organization the state of legitimacy. Social contract exists between corporations and individual members of society (Mathews, 1993).

 Accountability Theory
Accountability theory is concerned with the relationship between groups, individuals, organizations and the rights to information that such relationships bring about. Accountability is an act of being responsible or answerable for one's own decisions or actions with the expectation of explaining and justifying them when asked to do so. Simply stated, accountability is the duty to provide an account of the actions for which one is held responsible (Gray et al., 1991). The natures of the relationships and the attendant rights to information are contextually determined by the society in which the relationship occurs. It is absolutely true that some sort of relationship will exist between an organization and each of its stakeholders. Part of this relationship may be economic in nature and the terms determined by the parties as reflecting their relative powers in the relationship. The information flowing through the relationship will be determined by the power of the parties to demand it and the willingness of the organization to provide it (Gray et al., 1997).

 Political Economy Theory
Political economy theory explicitly recognizes the power conflicts that exist within society and the various struggles that occur between various groups within the society. The political economy is defined as the social, political and economic framework within which human life takes place (Gray et al., 1996a). The political economy perspective perceives accounting disclosures as social, political and economic documents (Guthrie et al., 1990).
They serve as a tool for constructing, sustaining and legitimizing economic and political arrangements, institutions and ideological themes which contribute to the corporation's private interests. Disclosures have the capacity to transmit social, political and economic meanings for a pluralistic set of report recipients. Political economy theory 57 and legitimacy theory seem to be more appropriate for analysis of exiting practices than as normative bases from which to deduce proper accountability relationships.

Empirical Literature
Magara, Aminga and Momanyi (2015) focused on the impact of environmental accounting on financial performance of corporate organizations in Kisii County. The study adopted a stratified sampling design where simple random sampling technique was used to identify a sample size of 49 employees drawn from all the 16 corporations. Both qualitative and quantitative data were collected using questionnaire, and secondary data and descriptive statistics were used to analyze the responses. The findings were presented in form of tables, charts and graphs. Findings revealed that the perceived financial performance of the corporate organization in general was in good status as perceived by the employees. Analysis of individual perceived financial performance parameters shows that revenue generation has been improving, cash flows are seen to be in a good state and profitability has been on the increase. Constructs of EA application are significantly positively related to perceived financial performance of the corporate organizations Bassey, Effiok and Eton (2013) examined the impact of environmental accounting and reporting an organizational performance with particular reference to oil and gas companies operating in the Niger Delta Region of Nigeria. The study was conducted using the Pearson's product moment correlation coefficient. The elements were selected by means of random and stratified sampling technique. Data were gathered from primary and secondary sources. Data collected were presented using tables and analyzed using the Pearson's product moment correlation analysis. It was found from the study that environmental cost has satisfied relationship with firm's profitability. It was concluded that environmentally friendly firms will significantly disclose environmental related information in financial statements and reports.
Ezejiofor, Akamelu and Chigbo (2016)  Okoye and Ezejiofor (2013)   The paper found that the business firm strategy includes responding to capital and operating costs of pollution control equipment. This is caused by increasing public concerns over environmental issues, and by a recent government led trend to incentive based regulation.
Lee, Pati & Roh (2011) examined the relationship between corporate sustainability performance and tangible business performance from Oil and Gas industry. Hierarchy regression analysis was utilized to study the relationship between a firm's business performance with respect to various dimensions of accounting and marketing based performance as well as the sustained growth rate. The study concludes that PSI and Research and Development (R&D) intensity are major determinants of business performance in the Oil and Gas Industries across countries.

Kasum and Osemene (2010) examined sustainable development and Financial Performance of Nigerian Quoted
Companies. The study discovered that sustainable development practice of companies is rarely associated with financial performance over the years studied.

Research Methodology
This study intends to examine the impact of environmental accounting and value relevance of accounting  Mathematically expressed as Equation 1 is used to test for the null hypotheses of non stationarity of unit root against trend stationaerity alternative in Y t where y refers to the examined time series. Equation 3 tests the null hypotheses of a unit root against a mean stationarity alternative.

Johansen Cointegration Test
The cointegration test established whether a long run equilibrium relationship exist among the variables. It is generally accepted that to establish a cointegration, the likelihood ratio must be greater than the Mackinnon critical values. The model can be stated as Where  is a constant term. To determine the direction of causality between the variables, the study employed the standard Granger causality test (Granger, 1969). The test is based on Vector Error Correction Model (VECM) which suggests that while the past can cause or predict the future, the future cannot predict or cause the past. Thus, according to Granger (1969) X Granger cause Y if past value of X can be used to the past value of Y, the test is based on the following 60 regression model.

Vector Error Correction Model
Co-integration is a prerequisite for the error correction mechanism. Since co-integration has been established, it is pertinent to proceed to the error correction model. The VECM is of this form: Where Y t is a vector of indigenous variables in the model. α is the parameter which measures the speed of adjustment through which the variables adjust to the long run values and the β is the vectors which estimates the long run cointegrating relationship among the variables in the model.  is the draft parameter and is the matrix of the parameters associated with the exogenous variables and the stochastic error term.

Results and Discussion of Findings
The following tables show the dynamic relationship between the dependent and independent variables as formulated in the regression models.    The co-integration test as presented in the above table indicate at least two co-integrating equation from the trace statistics and the maximum Eigen value, therefore we reject null hypothesis of no co-integration and accept the alternate that there is co-integrating equation and conclude the presence of long-run relationship among the variables, therefore we test the nature of long-run relationship between the dependent and the independent variable using the normalize co-integrating equation.  The causality test presented in the above table reveals that there is no causality from the independent to the dependent and from the dependent to the independent variables. Again this is contrary to our expectation and can be trace to information asymmetric surrounding the value relevance of accounting information in the commercial banks.

Discussion of Findings
The value relevance of accounting information is important to both internal and external user of accounting information. It is determine by factors within the operation of the firm and out the operation of the firm. One of the challenges of the environmental accounting on value accounting information is the neglect of environmental accounting in financial reporting, for instance, the neglect of human resource accounting in financial reporting or the recognition of human resource accounting as an expenses rather than an investment can affect the value relevant of accounting information. The findings of this study indicate that environmental accounting significantly affects the value relevance of accounting information in the commercial banks. The β coefficient of the variable shows that the positive coefficient of 2.499DN, 4.605CWS, 0.435CENE proved that an increase of the independent variables will add positively to equity prices of the commercials banks while the negative value of -2.413 shows that an increase will add negatively to the equity price. The positive value of 1.898DN, 2.218CWS, 0.086CEN reveal that an increase on the independent variables will affect positively earnings per share of the commercial banks while the negative value of 2.714 will affect negatively the earnings per share.
The The insignificant impact of independent variable can be trace to information asymmetric surrounding the value relevance of accounting information such as the imperfection in the capital market as oppose to the classical assumption of perfect market.

Conclusion
The relationship between the dependent and the independent variables are presented in the above tables. From the static regression result, donations, wages and salaries and cost of environmental expenditure have positive effect on value relevance of accounting information which is proxy by equity prices of the commercial banks and earnings per share. The model summary proved 74.0%, 51.2%, 60.3% and 50.4% explained variation. The stationrity test proved the presence of stationarirty at first difference, the cointegration test shows the presence of long run relationship, therefore this study conclude that environmental accounting have significant effect on value relevance of accounting information in Nigeria commercial banks.

Recommendation
From the findings, we draw the following recommendations:  All cost inured in the process of business transaction should be properly reported in the financial statement and accounted for to enhanced the value relevance of accounting information.
 All cost relate to human resource development should be integrated in the financial reporting as an assets and deducted from income as cost.
 Effective measures should be devising by management to enhance environmental accounting management that will impact positively on value relevance of accounting information.
 Policies should be formulated to encourage environmental accounting in corporate organizations.