Environmental Liability Provisions and Earnings Persistence of Oil Firms in Nigeria

The purpose of this study is to examine whether provision for environmental liability is associated with earnings persistence of oil firms in Nigeria. The study also examines whether changes in provision for environmental liability is associated with earnings quality. Data from four oil firms for the period 2012 to 2018 were analysed using ordinary least square regression with robust standard errors. Two hypotheses formulated for the study were tested by regressing future earnings on current earnings and other variables. Results showed that environmental liability provisions were not significantly related to earnings persistence. Changes in these provisions were also insignificantly related to earnings quality. The evidence supports institutional theory as basis for explaining the relationship between environmental liability provisions and earnings quality in Nigeria; indicating that the relationship is not driven by ethical considerations or stakeholder concern. There is need for a legal framework for environmental financial reporting in Nigeria to ensure that the environmental obligations of all polluting firms are adequately accounted for, and earnings numbers are ethically reported.