Does cultural economics affect country’s competitiveness?

Abstract

The increasing emphasis on environmental sustainability has fundamentally transformed corporate reporting and banking practices worldwide. Financial institutions are under growing pressure from regulators, investors, and other stakeholders to integrate environmental considerations into their strategic decision-making while maintaining strong financial performance. Despite the rapid growth of sustainable banking initiatives globally, empirical evidence regarding the financial implications of green accounting practices remains inconclusive, particularly within emerging economies where sustainability reporting frameworks continue to evolve. This study investigates whether green accounting practices improve the financial performance of Nigerian deposit money banks by examining the effects of environmental cost reporting, sustainability reporting, green project financing, and paperless banking adoption on key indicators of financial performance. The study adopts an ex post facto research design using a balanced panel dataset comprising ten listed deposit money banks in Nigeria over the period 2015–2024. Secondary data were extracted from audited annual reports, sustainability reports, Nigerian Exchange Group disclosures, and regulatory publications. Panel regression techniques were employed to estimate the relationships after conducting appropriate diagnostic tests, including multicollinearity, heteroskedasticity, serial correlation, cross-sectional dependence, and Hausman specification tests. The empirical findings indicate that environmental cost reporting significantly reduces the cost-to-income ratio (β = –0.844, p = 0.017), suggesting improved operational efficiency through better environmental cost management. Sustainability reporting exerts a significant positive effect on return on assets (β = 0.326, p < 0.001), implying that enhanced environmental transparency contributes to improved profitability. Similarly, green project financing significantly reduces the non-performing loan ratio (β = –1.611, p < 0.001), indicating that environmentally sustainable lending strengthens credit portfolio quality. Furthermore, paperless banking adoption significantly lowers the administrative expense ratio (β = –2.795, p = 0.002), demonstrating that digital transformation enhances operational efficiency while simultaneously promoting environmental sustainability. The findings provide robust empirical support for Stakeholder Theory, Institutional Theory, Legitimacy Theory, and Sustainable Development Theory by demonstrating that green accounting practices create economic value through improved governance, enhanced stakeholder confidence, superior resource utilization, strengthened credit risk management, and increased operational efficiency. The study contributes to the emerging literature on sustainable finance by providing multidimensional evidence from an African emerging economy and offers important implications for banking executives, regulators, policymakers, and investors seeking to strengthen sustainable banking practices. The study recommends that Nigerian deposit money banks institutionalize comprehensive environmental accounting systems, expand green financing portfolios, strengthen sustainability reporting in line with the International Sustainability Standards Board (ISSB) framework, and accelerate digital transformation to enhance long-term financial resilience and sustainable value creation.

Keyword : Deposit money banks; Environmental accounting; Financial performance; Green accounting; Green finance; Nigeria; Panel regression; Sustainability reporting; Sustainable banking.