Moderating Effect of Board Characteristics on the Relationship Between Renewable Energy Investment and Firm Performance among Oil & Gas Firms in Sub Saharan Africa

Several factors affect the firm performance of oil and gas firms due to their potential relevance to a company's profitability and sustainability. Renewable energy investment includes the factors that represent an enormous challenge to the oil and gas firm's survival. This study examines the moderating effect of board characteristics on the relationship between renewable energy investment and firm financial performance among oil and gas firms in sub-Saharan Africa. The sample population of fifty (50) oil and gas firms was selected using the purposive sampling method. Data were collected from secondary sources comprising an audited annual financial statement of sampled firms and the LSEG data stream. The period of the study was ten (10) years (2014–2023). Data were analysed using a linear multiple regression technique in the STATA software package. The result of the study reveals a significant negative effect of renewable energy investment on Return on Assets (ROA) and a significant positive effect on Net Profit Margin (NPM). Similarly, board independence and board tenure have an insignificant moderating effect on the relationship between renewable energy investment, ROA and NPM. While board expertise has a positive moderating effect on the relationship between renewable energy investment and NPM. Gender diversity has a positive moderating effect on the relationship between renewable energy investment and ROA of oil and firms of sub-Saharan Africa. The study concludes that while renewable energy investments temporarily decrease return on assets, it has a long-term profitability benefit, create value for investors’ confidence and firms’ sustainability among the oil and gas firms, especially when complemented by an effective corporate governance mechanism. Therefore, this study suggests for effective corporate governance compliance, specifically boards with expert members and more female directors are in better positioned to guide, evaluate and contribute to good oversight and innovative investment decisions in renewable energy, also a collaboration of oil and gas firms with governments, development banks and private investors to provide incentives in terms of concessional funds, subsidies and tax reliefs to encouraged the firms to invest more on renewable energy projects beyond the current average investment level to strengthen long-term competitiveness and resilience against oil price volatility and improved firm performance.

Firm performance, Investment

1. Abel, B. M., Appathurai, S., Fitz, R., Follette, C., & Vannier, B. (2023). A Path Forward for Cash-Rich Companies. Report, June 2022. [Google Scholar] [Crossref]

2. Adams, D., Adams, K., Attah-boakye, R., Ullah, S., Rodgers, W., & Kimani, D. (2022). Social and environmental practices and corporate financial performance of multinational corporations in emerging markets : Evidence from 20 oil-rich African countries. Resources Policy, 78(July 2021), 102756. https://doi.org/10.1016/j.resourpol.2022.102756 [Google Scholar] [Crossref]

3. Abel, B. M., Appathurai, S., Fitz, R., Follette, C., & Vannier, B. (2023). A Path Forward for Cash-Rich Companies. Report, June 2022. [Google Scholar] [Crossref]

4. Adams, D., Adams, K., Attah-boakye, R., Ullah, S., Rodgers, W., & Kimani, D. (2022). Social and environmental practices and corporate financial performance of multinational corporations in emerging markets : Evidence from 20 oil-rich African countries. Resources Policy, 78(July 2021), 102756. https://doi.org/10.1016/j.resourpol.2022.102756 [Google Scholar] [Crossref]

5. Akuno, M. O. (2018). Effect of firm characteristics on the financial performance of energy and petroleum firms listed in the Nairobi securities exchange. Master Thesis. University of Nairobi 1–65. [Google Scholar] [Crossref]

6. Ali, A., & Fatima, N. (2023). Growth and Financial Performance Governance by the Total Resources : A Case of Indian Downstream Oil and Gas Firms. International Journal of Energy Economics and Policy. https://doi.org/10.32479/ijeep.14347 [Google Scholar] [Crossref]

7. Ali, A. M., & Aminu, I. Y. (2021). Board Attributes and Financial Performance of Listed Oil and Gas Companies in Nigeria. Lapai Journal of Economics;, 5(1), 109–122. [Google Scholar] [Crossref]

8. Asika, R. (2022).Leverage and Social Sustainability reporting on listed oil and gas firms in Nigeria. International Journal of Advanced Academic Research | 8(3), 1–14. [Google Scholar] [Crossref]

9. Asikhia, O. U., Fabunmi, S. A., & Akinlabi, B. H. (2023). Corporate Governance Mechanisms and Financial Performance of Listed Oil and Gas Firms in Nigeria : An Empirical Assessment. Asian Journal of Economics, Business and Accounting 23(16), 41–54. https://doi.org/10.9734/AJEBA/2023/v23i161025 [Google Scholar] [Crossref]

10. Assenga, M. P., Aly, D., & Hussainey, K. (2018). The impact of board characteristics on the financial performance of Tanzanian firms. Corporate Governance (Bingley), 18(6), 1089–1106. https://doi.org/10.1108/CG-09-2016-0174 [Google Scholar] [Crossref]

11. Bajwa, M. M. T., Wood, M. O., & Rus, H. (2023). Scoping the Mediating Role of Corporate Governance on the Relationship Between Sustainability and Financial Performance of Firms. Journal of Management and Sustainability, 13(2), 88. https://doi.org/10.5539/jms.v13n2p88 [Google Scholar] [Crossref]

12. Bezawada, B., & Adavelli, S. R. (2020). Corporate Governance , Board Characteristics and Performance of Indian Banks : An Empirical Study. International Journal of Economics and Financial Issues 10(3), 83–87. [Google Scholar] [Crossref]

13. Borodin, A., Mityushina, I., Harputlu, M., Kiseleva, N., & Kulikov, A. (2023). Factor Analysis of the Efficiency of Russian Oil and Gas Companies International Journal of Energy Economics and Policy 13(1), 172–188. [Google Scholar] [Crossref]

14. Bui, M. T., & Nguyen, H. M. (2021). Determinants Affecting Profitability of Firms : A Study of Oil and Gas Industry in Vietnam. Journal of Asian Finance, Economics and Busines 8(1), 599–608. https://doi.org/10.13106/jafeb.2021.vol8.no1.599 [Google Scholar] [Crossref]

15. Calgary, A. (2020).The Role of the Board of Directors in Canadian Petroleum Companies during an Energy Transition into Sustainable Energy Sources. Master Thesis. University of Calgary. [Google Scholar] [Crossref]

16. Cheung, K. Y., & Lai, C. Y. (2022). Board Directorships and Carbon Emissions: Curvilinear Relationships and Moderating Roles of Other Board Characteristics. Journal of Risk and Financial Management, 15(12). https://doi.org/10.3390/jrfm15120550 [Google Scholar] [Crossref]

17. Cong, Y., & Freedman, M. (2011). Advances in Accounting , incorporating Advances in International Accounting Corporate governance and environmental performance and disclosures. Advances in International Accounting 27, 223–232. https://doi.org/10.1016/j.adiac.2011.05.005 [Google Scholar] [Crossref]

18. Cormier, D., & Beauchamp, C. (2021). Market incidence of carbon information disclosure in the oil and gas industry : the mediating role of fi nancial analysts and governance. Journal of Financial Reporting and Accounting 19(5), 901–920. https://doi.org/10.1108/JFRA-10-2020-0302 [Google Scholar] [Crossref]

19. Daferighe, E. E., & Etim, E. O. (2023).Ggreen board committee and Profitability of publicly traded oil companies.Global Scientific Journal,11(!) [Google Scholar] [Crossref]

20. Dong, Y., Liang, C., & Wanyin, Z. (2023). Board diversity and firm performance : impact of ESG activities in China. Economic Research-Ekonomska Istraživanja, 36(1), 1592–1609. https://doi.org/10.1080/1331677X.2022.2090406 [Google Scholar] [Crossref]

21. Doni, F., Corvino, A., & Martini, S. B. (2022). Corporate governance model , stakeholder engagement and social issues evidence from European oil and gas industry. Social Responsibility Journal 18(3), 636–662. https://doi.org/10.1108/SRJ-08-2020-0336 [Google Scholar] [Crossref]

22. Evans, O. I., Densford, M., Enock, M., & James, W. (2023). Influence of Green Distribution on Performance of Private Oil and Gas Marketing Firms in Kenya: Moderating Influence of Government Regulations *Obiso. African Journal of Education, Science and Technology, 7(3), 293–309. [Google Scholar] [Crossref]

23. Fabian, O., Onuora, J. K. J., & Obianuju, O. (2022). Environmental Accounting Practices, Social Responsibility Disclosures and Firm Value; Evidence from listed Oil and Gas Firms in Nigeria. International Journal of Economics and Business Management, 8(1), 29–42. www.iiardjournals.org [Google Scholar] [Crossref]

24. Fooladi, M. (2012). Board Characteristics and Firm Performance. Journal of Modern Accounting and Auditing, 8(5), 688–694. http://ssrn.com/abstract=2207846 [Google Scholar] [Crossref]

25. Ganda, F., & Milondzo, K. S. (2018). The Impact of Carbon Emissions on Corporate Financial Performance : Evidence from the South African Firms.Journal of Sustainability https://doi.org/10.3390/su10072398 [Google Scholar] [Crossref]

26. García-Amate, A., Ramírez-Orellana, A., Rojo-Ramírez, A. A., & Casado-Belmonte, M. P. (2023). Do ESG controversies moderate the relationship between CSR and corporate financial performance in oil and gas firms? Humanities and Social Sciences Communications, 10(1). https://doi.org/10.1057/s41599-023-02256-y [Google Scholar] [Crossref]

27. Governance, C. (2018). Corporate Governance Mechanisms and Firm Performance: Evidence from the Emerging Market Following the Revised CG Code.Article. https://doi.org/10.1108/CG-07-2018-0244/full/html [Google Scholar] [Crossref]

28. Grosu, V., Tiron-tudor, A., Socoliuc, M., Ciubotariu, M., Hlaciuc, E., Macovei, A., Tulvinschi, M., & Melega, A. (2023). Financial sustainability of oil and gas companies — basis for building resilience strategies. Frontierin Environmental science, 1–13. https://doi.org/10.3389/fenvs.2023.1205522 [Google Scholar] [Crossref]

29. Hartmann, J., Inkpen, A., & Ramaswamy, K. (2022). The oil and gas industry : fi nding the right stance in the energy transition sweepstakes. Business strategy 34(1), 17–27. https://doi.org/10.1108/JBS-07-2020-0156 [Google Scholar] [Crossref]

30. Harun, M. S., Hussainey, K., Mohd Kharuddin, K. A., & Farooque, O. Al. (2020). CSR Disclosure, Corporate Governance and Firm Value: a study on GCC Islamic Banks. International Journal of Accounting and Information Management. International Journal of Accounting and Information Management 28(4), 607–638. https://doi.org/10.1108/IJAIM-08-2019-0103 [Google Scholar] [Crossref]

31. Hermundsdottir, F., & Aspelund, A. (2022). Competitive sustainable manufacturing - Sustainability strategies , environmental and social innovations , and their effects on firm performance. Journal of Cleaner Production, 370(October 2021), 133474. https://doi.org/10.1016/j.jclepro.2022.133474 [Google Scholar] [Crossref]

32. Herzog-hawelka, J., & Gupta, J. (2023). Energy Research & Social Science The role of ( multi ) national oil and gas companies in leaving fossil fuels underground : A systematic literature review. Energy Research & Social Science journal 103(December 2022). [Google Scholar] [Crossref]

33. Huang, S., Hilary, G., Huang, S., Hilary, G., Board, Z, F. (2018). Zombie Board : Board Tenure and Firm Performance. Open Science. https://hal.science/hal-01736889 [Google Scholar] [Crossref]

34. Hussain, N., Rigoni, U., & Orij, R. P. (2018). Corporate Governance and Sustainability Performance: Analysis of Triple Bottom Line Performance. Journal of Business Ethics, 149(2), 411–432. https://doi.org/10.1007/s10551-016-3099-5 [Google Scholar] [Crossref]

35. International Energy Agency (IEA). (2023). Oil 2023. Iea. www.iea.org/t&c/ [Google Scholar] [Crossref]

36. James, I. E., & A, O. S. (2023).Effect of Environmental performance disclosure on the profitability of the oil and firms. Finance & Accounting Research Journal 5(7). https://doi.org/10.51594/farj.v5i7.508 [Google Scholar] [Crossref]

37. Jiao Jia, Hongfeng Peng∗b, Hanwen Sunc, and H. X. (2021). Board Tenure Diversity , Culture and Firm Risk : Cross-Country Evidence. Article. [Google Scholar] [Crossref]

38. Journal, I., Economics, O. F., & Studies, F. (2022). Impact of Economic indicators on company sustainability and corporate performance for sustainable development : comparability analysis between Nigerian and south.Africa. International journal of economics and finance studies 8055, 176–201. https://doi.org/10.34109/ijefs. [Google Scholar] [Crossref]

39. Kaupke, K., & Knyphausen-aufseß, D. (2023). Sustainability and firm value in the oil and gas industry — A vicious circle ?. Corp Soc Responsib Environ Manag,August 2022, 1129–1144. https://doi.org/10.1002/csr.2409 [Google Scholar] [Crossref]

40. Kountriasova, A. (2022). Internal and external factors affecting oil and gas companies ’ climate change performance. Master Thesis. Louvain School of Management [Google Scholar] [Crossref]

41. Kwame, E., Appah, S., Saalidong, B. M., Gyimah, J., Niyonzima, P., Mintah, C., & Ahakwa, I. (2023). Exploring new antecedent metrics for safety performance in Ghana ’ s oil and gas industry using partial least squares structural equation modelling. Resources Policy, 81(February), 103368. https://doi.org/10.1016/j.resourpol.2023.103368 [Google Scholar] [Crossref]

42. Kwarteng, P., Appiah, K. O., & Addai, B. (2023). Influence of board mechanisms on sustainability performance for listed firms in Sub-Saharan Africa. Future Business Journal, 9(1). https://doi.org/10.1186/s43093-023-00258-5 [Google Scholar] [Crossref]

43. Lee, C. L. E. E. (2019). Corporate Governance, Corporate Social Responsibility reporting and firm performance in Asean-4 countries. Doctoral Thesis. University of Malaya [Google Scholar] [Crossref]

44. Livnat, J., & Suslava, K. (2021). Bucknell Digital Commons Board Tenure and Firm Performance. Global Finance Journal. 2-2021. [Google Scholar] [Crossref]

45. Mahmood, Z., Kouser, R., & Masud, M. A. K. (2019). An emerging economy perspective on corporate sustainability reporting – main actors’ views on the current state of affairs in Pakistan. Asian Journal of Sustainability and Social Responsibility, 4(1). https://doi.org/10.1186/s41180-019-0027-5 [Google Scholar] [Crossref]

46. Makpotche, M., Bouslah, K., & Zali, B. B. M. (2023). Corporate governance mechanisms and renewable energy transition. JEL. https://doi.org/10.1108/CG-06-2023-0245 [Google Scholar] [Crossref]

47. María, C. P.-M., & Isabel, G.-Á. (2019). Do board characteristics drive firm performance? An international perspective. Review of Managerial Science, 1–57. [Google Scholar] [Crossref]

48. Marthinsen, T., Bashiri, N., & Lu, L. (2021). Does green innovation damage financial performance of oil and gas companies ?. Resources Policy 73(June). https://doi.org/10.1016/j.resourpol.2021.102235 [Google Scholar] [Crossref]

49. Martín, C. J. G. (2019). Do board characteristics affect environmental performance ? A study of EU firms. February, 1–21. https://doi.org/10.1002/csr.1775 [Google Scholar] [Crossref]

50. Meditari Accountancy Research. Article information : (2018). April 2010. https://doi.org/10.1108/10222529201000001 [Google Scholar] [Crossref]

51. Miotto, G. (2020). The impact of fast fashion retailers ’ sustainable collections on corporate legitimacy : Examining the mediating role of altruistic attributions. J Consumer Behav, June, 1–14. https://doi.org/10.1002/cb.1852 [Google Scholar] [Crossref]

52. Mishra, P., Pandey, C. M., & Singh, U. (2019). Descriptive Statistics and Normality Tests for Statistical Data. Annals of Cardiac Anaesthesia, 22(11) 67–72. https://doi.org/10.4103/aca.ACA [Google Scholar] [Crossref]

53. Mlay, L., Temu, S., & Mataba, L. (2023). The Impact of Board Characteristics on the Financial Performance of Savings and Credit Co-operative Societies in Arusha and Dar es Salaam, Tanzania. Tanzanian Economic Review, 13(1), 130–155. https://doi.org/10.56279/ter.v13i1.162 [Google Scholar] [Crossref]

54. Mohammed, A., Danladi, M. U., & Musa, A. B. (2023). Relationship between Gender Diversity and Board Size on Corporate Performance of Listed Insurance Firms in Nigeria. Gusau Journal of Economics and Development Studies, 3(1), 14. https://doi.org/10.57233/gujeds.v3i1.9 [Google Scholar] [Crossref]

55. Muhammad, A., Amedi, R., & Saeed Mustafa, A. (2020). Board Characteristics and Firm Performance: Evidence From Manufacture Sector of Jordan ARTICLE INFO ABSTRACT. Accounting Analysis Journal, 9(3), 146–151. https://doi.org/10.15294/aaj.v9i3.39577 [Google Scholar] [Crossref]

56. Muniandy, B., & Hillier, J. (2015). Board independence, investment opportunity set and performance of South African firms. Pacific Basin Finance Journal, 35, 108–124. https://doi.org/10.1016/j.pacfin.2014.11.003 [Google Scholar] [Crossref]

57. Murtaza, S. (2020). Do ownership and board characteristics enhance firm performance ? A corporate governance perspective. J Public Affairs.Z, June. https://doi.org/10.1002/pa.2515 [Google Scholar] [Crossref]

58. Nchofoung, T. N. (2023). Oil price shocks and energy transition in Africa. Energy Policy, 184(October 2023), 113855. https://doi.org/10.1016/j.enpol.2023.113855 [Google Scholar] [Crossref]

59. Nepal, M., & Deb, R. (2022). Board Characteristics and Firm Performance: Indian Textiles Sector Panorama. Management and Labour Studies, 47(1), 74–96. https://doi.org/10.1177/0258042X211026148 [Google Scholar] [Crossref]

60. Nicholson, G. J. (2007). Can Directors impact performance? a case based test of three theories of corporate governance. Corporate Governance An International Review 15, 585–608. [Google Scholar] [Crossref]

61. Nugraha, A. P. (2023). The Influence of Director Expertise and Executive Expertise on Firm Performance (An Empirical Study of the Two-tier Board System in Indonesia). International Journal of Accounting & Finance in Asia Pasific, 6(1), 53–69. https://doi.org/10.32535/ijafap.v6i1.2177 [Google Scholar] [Crossref]

62. Nwanwu, P. O., Ph, D., & Harcourt, P. (2022). Environmental Management Cost And Financial Performance Of Oil And Gas Companies In Nigeria. International Journal of Innovative Finance and Economics Research 10(2), 119–134. [Google Scholar] [Crossref]

63. Of, F., & Sciences, S. (2020). The effect of energy transition on the financial performance of oil and gas companies. Master Theisis, Universitet Stavanger. [Google Scholar] [Crossref]

64. Ofoegbu, G. N., & Onyebuenyi, F. E. (2022). Environmental sustainability disclosure and firm performance of quoted oil and gas companies in sub-saharan africa countries. Academy of Accounting and Financial Studies Journal January.26(1). https://www.researchgate.net/publication/358186591 [Google Scholar] [Crossref]

65. Ojo, A.,. (2021). Board characteristics and firm ’ s financial performance : evidence from public listed.Doctorate Thesis. Coventry University Okudo, C. L., & Amahalu, N. N. (2023). Effect of EnvironmentalAaccounting on profitability of listed oil and gas firms in nigeria. International Journal of Advanced Academic Research 9(3), 47–61. [Google Scholar] [Crossref]

66. Ozdemir, O. (2021). Corporate social responsibility and financial performance : Does board diversity matter ?.Journal of Global Business Insights, 6(2), 98–116. [Google Scholar] [Crossref]

67. Park, Y. S., Konge, L., & Jr, A. R. A. (2020). The Positivism Paradigm of Research. 690 Academic Medicine 95(5), 690–694. https://doi.org/10.1097/ACM.0000000000003093 [Google Scholar] [Crossref]

68. Pervin, R., & Rashid, M. M. (2019). Board Characteristics and Firm Performance: Evidence from Listed Banking Institutions of Bangladesh. International Journal of Management, Accounting and Economics Vol., 47(1), 3–10. [Google Scholar] [Crossref]

69. Rahi, A. F., Johansson, J., Blomkvist, M., & Hartwig, F. (2023). Corporate sustainability and financial performance: A hybrid literature review. Corporate Social Responsibility and Environmental Management, May, 1–15. https://doi.org/10.1002/csr.2600 [Google Scholar] [Crossref]

70. Ramírez-orellana, A., Martínez-victoria, M., García-amate, A., & Rojo-, A. A. (2023). Is the corporate financial strategy in the oil and gas sector affected by ESG dimensions ? Resources Policy, 81(April 2022), 103303. https://doi.org/10.1016/j.resourpol.2023.103303 [Google Scholar] [Crossref]

71. Rezende, L. de A., Bansi, A. C., Alves, M. F. R., & Galina, S. V. R. (2019). Take your time: Examining when green innovation affects financial performance in multinationals. Journal of Cleaner Production, 233, 993–1003. https://doi.org/10.1016/j.jclepro.2019.06.135 [Google Scholar] [Crossref]

72. Rossi, M., Chouaibi, J., Chouaibi, S., Jilani, W., & Chouaibi, Y. (2021). Does a Board Characteristic Moderate the Relationship between CSR Practices and Financial Performance? Evidence from European ESG Firms. Journal of Risk and Financial Management, 14(8). https://doi.org/10.3390/jrfm14080354 [Google Scholar] [Crossref]

73. Saeed, A., & Sameer, M. (2017). Impact of board gender diversity on dividend payments: Evidence from some emerging economies. International Business Review, 26(6), 1100–1113. https://doi.org/10.1016/j.ibusrev.2017.04.005 [Google Scholar] [Crossref]

74. Saleh, M. W. A., & Islam, M. A. (2020). Does Board Characteristics Enhance Firm Performance? Evidence from Palestinian Listed Companies. International Journal of Multidisciplinary Sciences and Advanced Technology, 1(4), 84–95. http://www.ijmsat.com [Google Scholar] [Crossref]

75. Shaikh, I. (2022). environmental , Social , and governance ( ESG ) Practice and Firm Performance : an International Evidence. Journal of Business Economics and Management, 23(2), 218–237. [Google Scholar] [Crossref]

76. Shao, L. (2019). Dynamic study of corporate governance structure and firm performance in China: Evidence from 2001-2015. J. of Chinese Management Studies, 13(2), 299–317. https://doi.org/10.1108/CMS-08-2017-0217 [Google Scholar] [Crossref]

77. Shyamanthi, O. N. . (2018). The moderating effect of sustainability reporting on the relationship between board characteristics and firm financial performance. 17th International Conference on Business Management University of Sri Jayewardenepura. 806–827. [Google Scholar] [Crossref]

78. Simnett, R., Vanstraelen, A., & Chua, W. F. (2009). Assurance on Sustainability Reports : An International Comparison. Accounting review 84(3), 937–967. [Google Scholar] [Crossref]

79. Tjcd-, M. I. D., Type, M., & Keywords, O. P. (2022). Exploring the effect of the renewable energy transition on CO2 emissions of Latin American & Caribbean countries Manuscript. International Journal of Sustainable Energy, 1–22. [Google Scholar] [Crossref]

80. Velte, P. (2021). Determinants and consequences of corporate social responsibility assurance: a systematic review of archival research. Society and Business Review, 16(1), 1–25. https://doi.org/10.1108/SBR-05-2020-0077 World Energy Investment 2023. (2023). Report. [Google Scholar] [Crossref]

81. Zhong, M., & Bazilian, M. D. (2018). Contours of the energy transition : Investment by international oil and gas companies in renewable energy. The Electricity Journal, 31(1), 82–91. https://doi.org/10.1016/j.tej.2018.01.001 [Google Scholar] [Crossref]

• IFRS S1 and S2: A Global and Indian Perspective with Implications for Auditors
• A Study on Consumer Attitudes and Buying Behavior towards organic Food Products
• India’s Transfer Pricing Framework: Evolution, Challenges, and Future Directions
• Application of Statistical Methods in Business Administration: A Quantitative Study on Organizational Performance
• Decoding Fintech Adoption: The Role of Trust, Risks and Perceived Benefits