ENVIRONMENTAL REPORTING AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA: THE MEDIATING PERSPECTIVE OF INVESTMENT

Abstract
This study examined the mediating effect of investment on the relationship between environmental reporting and the financial performance of Deposit Money Banks listed on the Nigeria Exchange Group. The exogenous variable was environmental reporting measured as total expenditure on water, materials, waste management, and emission control while the dependent variable was financial performance proxied by earnings per share. The mediating variable was investment measured as the number of shareholders in a year. Data were collected from annual reports of 14 Deposit Money Banks (DMB) listed on the Nigeria Exchange Group. The structural equation model was used as a major technique of data analysis. The structural relationships between the variables were estimated in conjunction with the direct, indirect, and total effects to ascertain the effect of investment as a mediator on the relationship between environmental reporting and firm financial performance. Findings revealed that investment had a significant mediating effect on the relationship between environmental reporting and the financial performance of Deposit Money Banks listed on the Nigeria Exchange Group. It was recommended that environmental reporting activity is an expenditure but since it has been mediated by investment to have a positive and significant effect on banks’ financial performance, DMBs should continue with environmental reporting activities on water, materials, waste management and emission control as this may enhance performance through the attraction of more investors and also maintain a green work environment.
Keywords: Environmental responsibility, Financial performance, Mediation, Investment. Earnings per share
Introduction
Globally, corporate organizations make use of environmental resources to harness economic fortunes. The activities that lead to the achievement of economic wealth are characterized by some destructive tendencies in the environment. To continue with these operations, organizations are expected to inform the general public about the sustainable use of the environment in order not to shortchange the use of the same environmental resources in the future. The thrust of environmental reporting is to communicate environmental performance information to the stakeholders of an organization (Utile et al, 2017). This information includes but is not limited to impacts on the environment and the ways of managing those impacts such as waste generation and control, pollution and its control, environmental degradation, deforestation control, and carbon monoxide emission control amongst others. Financial performance on the other hand connotes how well an organization is meeting its desire for profitability and wealth creation.
The relationship between environmental reporting and firm financial performance is characterized by a major debate; viewed from a negative perspective, environmental reporting activity could be seen as an expenditure that negates financial performance because it is a reduction in the profit value. The contra opinion is that environmental reporting is a form of global best practice that gains reputational advantages for the firm and attracts more investors creating competition in the purchase of the shares of the firm and consequently increasing the market value through high share prices. The attraction of investors is also associated with increased funding and innovations that increase the financial performance of the firm. The proponent’s ontology between environmental reporting and financial performance is seen to be mediated by the attraction of more investors who come with more funds and innovative ideas for production and sales that may spark increases in financial performance. This implies that for financial performance to be enhanced through environmental reporting the reporting must attract investors. This makes investors mediators between environmental reporting and firm financial performance. The later part of the debate motivated this research to test the mediating effect of investment on the relationship between environmental reporting and the financial performance of banks listed on the Nigeria Exchange Group.