ENVIRONMENTAL COMPLIANCE COSTS AND TAX PLANNING BEHAVIOUR OF OIL-PRODUCING FIRMS IN NIGERIA

Ogbu, Ignatius Ikechukwu; Eneje, Beatrice Chinyere, Ph.D; Okeke Frankline C.S.A, Ph.D; Oyewole, Olubukola Sarah; Nwafor Ikechukwu C.

Authors

Ogbu, Ignatius Ikechukwu Department of Accountancy Alex Ekwueme Federal University, Ndufu-Alike.
Eneje, Beatrice Chinyere, Ph.D Department of Accountancy Alex Ekwueme Federal University, Ndufu-Alike.
Okeke Frankline C.S.A, Ph.D Department of Accountancy Alex Ekwueme Federal University, Ndufu-Alike
Oyewole, Olubukola Sarah Department of Accountancy Alex Ekwueme Federal University, Ndufu-Alike.
Nwafor Ikechukwu C. Department of Accountancy Alex Ekwueme Federal University, Ndufu-Alike.

Keywords:

Environmental compliance costs, corporate tax planning, ETR, DBTD, oil and gas, regulatory shocks.

Abstract

This study investigates how environmental compliance costs influence corporate tax planning among Nigerian oil-producing firms over the period 2012–2024. Drawing on panel data from five firms listed on the Nigerian Exchange Group and employing firm and year fixed-effects regressions, the analysis examines three complementary measures of tax planning: effective tax rates (ETR), cash effective tax rates (CASH_ETR), and discretionary book–tax differences (DBTD). The findings reveal a dual mechanism through which environmental regulation shapes tax behavior. Sustained environmental compliance costs are positively associated with ETR and CASH_ETR and negatively associated with DBTD, indicating more conservative tax behavior consistent with political cost and stakeholder monitoring theories. These results suggest that heightened regulatory scrutiny and visibility constrain aggressive tax planning. In contrast, exogenous environmental regulatory cost shocks are associated with lower ETR and higher DBTD in the short term, indicating temporary increases in tax avoidance driven by liquidity pressures. By providing firm-level evidence from an emerging economy characterized by high environmental risk and evolving institutions, the study extends the ESG–tax avoidance literature beyond developed markets. The results highlight the importance of regulatory timing, enforcement, and coordinated environmental and tax policies in shaping corporate tax strategies

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ENVIRONMENTAL COMPLIANCE COSTS AND TAX PLANNING BEHAVIOUR OF OIL-PRODUCING FIRMS IN NIGERIA

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