EFFECT OF SOCIAL COSTS ACCOUNTING ON PRICE EARNING RATIO OF LISTED FIRMS IN NIGERIA

Abstract

The effect of globalization had changed the perception of listed firms to develop and implement strategies for competitive positioning. This study therefore investigated the effect of social costs accounting on pricing-earnings ratio of listed firms in Nigeria. It adopted ex post facto research design and extracted relevant data from cross section of 20 listed firms from three sectors which are comparatively very active in social responsibility issues. The paper employed purposive sampling technique to select the sample size. The study covered a period of 11 years from 2005 to 2015, when the economy experienced considerable revitalization and growth. Panel unit root test was conducted and the variables were found to be stationary and integrated at level. The study engaged panel data regression technique where the Hausman’s test favoured the fixed effect regression. It therefore conducted fixed effect regressed with the dummies and established that social costs accounting have significant effect on price-earnings ratio of listed firms in Nigeria. It provided proof that two sectors responded to social activities that significantly influenced their individual price-earning ratios. In addition, the result gave evidence how the consumers goods sector is more socially friendly than the industrial goods sector by 53.53%. The study therefore concludes that social activities has long run relationship with price-earnings ratio of listed firms in Nigeria and recommends that listed firms should endeavor to identify relevant areas that would enhance their reputation in the eyes of the investing public, the financial services, consumer and industrial goods sectors should increase their participation on social issues and its reporting.