Environmental Management Accounting Costing Techniques and Long-Term Financial Liquidity in Manufacturing Firms
Author:
Segopotje E. MALATJI, Collins C. NGWAKWE
JEL:
C12, C33, C83, C89, E21, L25, L66, M41, N67, Q56
DOI:
10.20869/AUDITF/2026/184/026
Keywords:
activity-based costing; environmental management accounting; costing techniques; life cycle costing; liquidity; material flow cost accounting;
Abstract:
Since the introduction of environmental management accounting (EMA), firms have applied it at different levels, with some using it for managing financial performance. However, prior studies focused on other financial performance measures, such as profitability, with limited attention given to long-term financial liquidity in firms. Moreover, studies on EMA costing techniques tend to examine them in isolation. This paper covers three costing techniques popular in the EMA literature: activity-based costing (ABC), life cycle costing (LCC), and material flow cost accounting (MFCA). Thus, this paper aims to determine the effect of EMA costing techniques on long-term financial liquidity in manufacturing firms. The study used quantitative research method and selected 22 manufacturing firms listed on Johannesburg Stock Exchange. The paper collected secondary data on debt-to-asset ratio, total sales revenue and asset turnover ratio on the sampled firms’ audited financial statements for 12 years (2013-2024). Additionally, quantitative primary data on activity-based costing, life cycle costing and material flow cost accounting was collected from Finance Managers and Chief Financial Officers of the sampled firms. The data was analysed with Ordinary Least Squares. The findings show a positive (yet significant) relationship between ABC and long-term financial liquidity. In addition, the findings indicate a negative (yet insignificant) relationship between LLC and long-term financial liquidity. Moreover, the findings show a positive (yet insignificant) relationship between MFCA and long-term financial liquidity. These findings suggest that the sampled firms did not use EMA costing techniques in managing their long-term financial liquidity and majority of their long-term assets are financed by long-term debts. At the theoretical level, this paper contributes to filling the existing gap in EMA literature by combining the three EMA costing techniques in one study to explain long-term financial liquidity challenges in firms. At practical level, this paper calls for manufacturing firms to reduce reliance on long-term debt providers and increase the extent of applying EMA costing techniques to attract equity investors.
Abstract(214KB)
Article(476KB)