Corporate Social Responsibility Costs and Earnings Management of Oil and Gas Firms in Nigeria

The oil and gas industry in Nigeria is vital but criticized for social and environmental harm in the host communities. However, firms adopt Corporate Social Responsibility (CSR) to improve public image, but in weak regulatory environment, corporate social responsibility may be used to hide unethical practices like earnings management. This study addresses the gap by investigating the link between corporate social responsibility and earnings management to understand the real motive behind corporate social responsibility cost. The main objective of this study was to examine the effect of corporate social responsibility on earnings management of oil and gas firms in Nigeria. The specific objectives were to ascertain the effect of social donations cost on discretionary accruals of oil and gas firms in Nigeria, determine the effect of occupational health and safety cost on discretionary accruals of oil and gas firms in Nigeria, ascertain the influence of education support cost on discretionary accruals of oil and gas firms in Nigeria, investigate the effect of community development cost on discretionary accruals of oil and gas firms in Nigeria and examine the effect of environmental conservation cost on discretionary accruals of oil and gas firms in Nigeria. The study adopted an ex-post facto research design and utilized a panel data of ninety (90) pooled observations gathered from nine (9) listed oil and gas firms over ten (10)-year period (2014-2023). The study however, employed a panel multiple regression technique to analyze the data via E-views 10.0 statistical package. The study findings revealed that social donation cost has a significant positive relationship (Coeff. = 0.1784, p-value = 0.0386) with discretionary accruals, occupational health and safety cost has an insignificant negative relationship (Coeff. = -0.010966, p-value = 0.9345) with discretionary accruals while Education support cost has an insignificant negative relationship (Coeff. = -0.007570, p-value = 0.9525) with discretionary accruals. It also reveals that community development cost has a significant negative relationship (Coeff. = -0.025143, p-value = 0.0240) with discretionary accruals while environmental conservation cost has a significant negative relationship (Coeff. = -0.007812, p-value = 0.0200) with discretionary accruals. At 5% level of significance, it was thus concluded that corporate social responsibility cost (CSRC) has a significant effect on discretionary accruals in the Nigerian oil and gas industry. The recommendations made, included that regulators and stakeholders should closely monitor social donations made by oil and gas firms in Nigeria to prevent earnings manipulation. Firms should also prioritize transparency in their social donation practices and ensure that these donations are aligned with genuine social responsibility goals rather than just being used to manipulate earnings.