Publication: Environmental Accounting Costs And Financial Performance Of Cement Manufacturing Firms In Coast Region, Kenya
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2024
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Journal of Economics and Finance
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Abstract
Within the industrial landscape, the environmental impact of manufacturing operations has raised concerns about
the associated costs for environmental remediation. This study delves into the interaction between these
environmental accounting expenses and the financial performance of Cement manufacturing firms in Coast
region, Kenya, moderating effect of corporate governance over the 2018-2022 periods. The research objectives
were as follows: To analyze the influence of environmental remediation costs on financial performance, to
evaluate the correlation between social activity costs and financial performance, to assess the effect of restoration
cost on financial performance, to investigate the effect of upstream/downstream costs on the financial
performance of Cement manufacturing firms in Coast region, Kenya moderated by corporate governance. The
study was drawn from four foundational theories: Stakeholders Theory, Legitimacy Theory, Positive Accounting
Theory, and Luhmann's Theory of Ecological Communication. These theories provided lenses to examine the
intricate relationship between environmental costs and financial outcomes. Methodologically, a descriptive
research design was employed, combining quantitative and qualitative approaches. The participant pool
comprised 56 respondents, including Managers, Accountants, and Auditors. Data collection involved structured
questionnaires for primary data and annual reports/accounts for secondary data from Cement Manufacturing
Company Ltd in Coast Region. Data analysis encompassed descriptive statistics such as mean and standard
deviation as well as inferential statistics including regression and correlation analysis using the Statistical
Package for the Social Sciences (SPSS). Findings of the study indicated th,at environmental remediation cost
(r=0.235, p=0.000), social activities cost (r=0.248, p=0.092) and environmental remedial cost (β = 0.538, p-
value=0.000) all have positive and substantial link between environmental costs and the financial performance
of coastal cement producing enterprises. It confirmed that corporate governance acts as a moderator P-value
of 0.003 in the relationship between the predictor variables and outcome variables. Therefore,the inclusion
of the indicated environmental cost clearly benefits the company by enhancing its image and boosting its financial
performance in the eyes of its stakeholders. The study also concluded that there was a significant requirement to
bear the expenses of environmental accounting for environmental remediation and restoration. The study
suggests that organizations should incorporate the aforementioned environmental accounting costs into their
annual reports as part of their corporate governance standards, especially considering the global adoption of
green initiatives.
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Environmental Remedial costs, Environmental Restoration Cost, Social Activity Costs Financial Performance