Moderating Effect of Firm Size on the Relationship Between Environmental Cost and Financial Performance of Listed Consumers Goods Firm in Nigeria

Abstract

Environmental costs increasingly burden manufacturing firms, yet their effect on financial performance remains inconsistent and poorly understood, creating uncertainty about whether such expenditures enhance or erode corporate profitability. This study examined the moderating effect of firm size on the relationship between environmental cost and financial performance of listed consumer goods firms in Nigeria. the study adopted an ex-post facto research design, utilizing secondary data from annual reports of thirteen listed consumer goods firms on the Nigerian Exchange Group covering the period 2011 to 2024. The population comprised all listed consumer goods firms, with a purposive and judgmental sampling technique employed to select all thirteen firms. Data were collected from published financial statements and panel least squares regression technique analyzed using EViews 10 statistical software. Findings revealed that employee health and safety cost has a negative but significant effect on return on capital employed, while pollution control cost has a positive and significant effect on return on capital employed. Firm size has a significant positive direct effect on financial performance. The moderating effects showed that firm size significantly mitigated the negative effect of employee health and safety cost but diminished the positive returns from pollution control investments. It was recommended among others that firms should adopt scale-appropriate environmental investment strategies, with smaller firms prioritizing pollution control for competitive positioning while larger firms should optimize health and safety integration with broader corporate social responsibility initiatives.