Environmental Accounting and Firm Profitability : An Empirical Analysis of Selected Firms Listed in Bombay Stock Exchange , India
Makori, D. M.
Jagongo, A. O.
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Environmental accounting is the ability to provide accurate information in the financial statements regarding the estimated social cost occasioned by the production externalities on the environment and how much deliberate intervention cost had been incurred to bridge the gap between the marginal social cost and the marginal private cost by a firm. The objective of this study is to establish whether there is any significant relationship between environmental accounting and profitability of selected firms listed in India. The data for the study were collected from annual reports and accounts of 14randomly selected quoted companies in Bombay Stock Exchange in India. The data were analyzed using multiple regression models. The key findings of the study shows that there is significant negative relationship between Environmental Accounting and Return on Capital Employed (ROCE) and Earnings per Share (EPS) and a significant positive relationship between Environmental Accounting and Net Profit Margin and Dividend per Share. Based on this it was recommended that government should give tax credit to organizations that comply with its environmental laws and that environmental reporting should be made compulsory in India so as to improve the performance of organizations and the nation as a whole.