Impact Of Esg Reporting On Cash Flow Margin Of Listed Oil And Gas Firms In Nigeria

Impact of ESG Reporting on Cash Flow Margin of Listed Oil and Gas Firms in Nigeria

Eni-Egwu Catherine Odima¹, Ama, G.A.N², Dibia, N.O³, Uche Okoro Orji⁴

¹Department of Accountancy, Akanu Ibiam Federal Polytechnic Unwana

^2,3,4Department of Accounting, Abia State University Uturu

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000362

Received: 02 September 2025; Accepted: 10 September 2025; Published: 11 October 2025

ABSTRACT

The study focused on the impact of ESG reporting on cash flow margin of listed oil and gas firms in Nigeria. Environmental, social and governance reporting represent the independent variable of the study and was measured using ESG scores adopted from global reporting initiatives. However, transparency and accountability represents the dependent variable of the study and was measured using cash flow margin. To achieve the objective of this study content analysis research design was adopted. The sample size of the study is made up of 9 selected oil and gas firms in Nigeria. The data collected were analyzed using both descriptive statistics and panel data based multiple regression analysis. The regression analysis results revealed that environmental reporting and social reporting have no significant impact on cash flow margin of listed oil and gas firms in Nigeria. However, governance reporting has a significant impact on cash flow margin of listed oil and gas firms in Nigeria. Therefore the study recommends that In order to increase public awareness, it is advised that the government set benchmarks for classifying enterprises according to their ESG performance. Businesses are urged to report on sustainability as a matter of economics. Benefits may accrue in the future due to the influence of ESG performance’s potential for lag. The study also recommends that in order to increase investor confidence, which will have an impact on performance, companies must tell investors and include ESG performance measures as part of firm performance.

Keywords: Environmental reporting, social reporting, governance reporting, cashflow margin, oil and gas firms.

INTRODUCTION

The oil and gas industry in Nigeria has long been a cornerstone of the nation’s economy, contributing significantly to government revenue, foreign exchange earnings, and gross domestic product (GDP). Despite its economic importance, the sector faces increasing scrutiny due to its environmental footprint, social impacts, and governance challenges. The adoption of Environmental, Social, and Governance (ESG) reporting has emerged as a critical framework for assessing the sustainability and ethical performance of firms in this sector. ESG reporting involves the disclosure of non-financial metrics related to environmental conservation, social responsibility, and corporate governance practices, which are increasingly influencing stakeholders’ perceptions and investment decisions (OzataCanli & Sercemeli, 2025). As global awareness of sustainability grows, understanding the impact of ESG reporting on the financial performance of oil and gas firms, particularly cash flow margins, has become a vital area of research.

Cash flow margins, a key indicator of financial health, measure the ability of firms to convert revenue into cash, reflecting operational efficiency and liquidity. In the context of Nigeria’s oil and gas sector, where firms face challenges such as oil theft, regulatory inconsistencies, and environmental degradation, ESG reporting could play a pivotal role in shaping financial outcomes. High-quality ESG practices are hypothesized to enhance corporate financial performance by reducing operational risks, improving stakeholder trust, and attracting investment (Kirchhoff, et al., 2024). For instance, effective environmental management can lead to cost savings through energy efficiency and waste reduction, while robust social and governance practices can enhance reputation and investor confidence, potentially improving cash flow margins.

In Nigeria, the oil and gas industry operates in a complex socio-economic and environmental landscape. Environmental issues, such as oil spills and gas flaring, have caused significant ecological damage in the Niger Delta, leading to community unrest and reputational risks for firms (Adegbite, Guney, Kwabi, & Tahir, 2019). Socially, firms are under pressure to address stakeholder needs, including local communities and employees, to maintain their social license to operate. Governance challenges, including corruption and lack of transparency, further complicate the sector’s operations, as highlighted by posts on X discussing inefficiencies in hydrocarbon accounting and financial management. ESG reporting, therefore, serves as a tool for firms to demonstrate accountability and align with global sustainability standards, such as the Global Reporting Initiative (GRI) and the EU Taxonomy for Sustainable Activities (Kirchhoff, et al., 2024).

Empirical studies on ESG reporting in Nigeria’s oil and gas sector have produced mixed results. Some research indicates that environmental and economic reporting positively impacts financial performance metrics, such as net profit margins, in listed oil and gas companies (Tarmuji, Maelah, & Tarmuji, 2016). However, other studies, particularly in the global energy sector, suggest an insignificant or even negative relationship between ESG disclosures and financial performance, attributed to low disclosure quality or sector-specific challenges (OzataCanli & Sercemeli, 2025). These inconsistencies underscore the need for further investigation into how ESG reporting influences cash flow margins specifically, as this metric directly affects a firm’s ability to fund operations and invest in sustainable practices.

Above all, environmental, social, and governance (ESG) disclosure performance and cash flow margins are now major concerns of their stakeholders, investors, and consumers (Malik, 2015). In order to satisfy the needs of internal and external stakeholders, companies invest important resources in producing ESG reports, thus achieving transparency regarding the respective performance of a firm (Malik, 2015). In spite of that, it remains an open question whether ESG disclosure affects their financial performance and how.

Statement of the problem

The oil and gas industry in Nigeria, a critical pillar of the nation’s economy, faces increasing scrutiny to align with global sustainability standards, particularly in the areas of Environmental, Social, and Governance (ESG) reporting. As a major contributor to Nigeria’s GDP and foreign exchange earnings, the sector is under pressure to address environmental degradation, social inequalities, and governance challenges while maintaining financial viability. ESG reporting, which encompasses the disclosure of non-financial metrics related to environmental impact, social responsibility, and corporate governance, has emerged as a vital tool for assessing corporate sustainability and ethical performance. However, the extent to which ESG reporting influences the financial performance, specifically cash flow margins, of listed oil and gas firms in Nigeria remains underexplored (Okpa, et al., 2020).

The problem lies in the uncertainty surrounding the financial implications of adopting robust ESG practices in an industry characterized by high operational costs, environmental liabilities, and volatile global oil prices. While some studies suggest that strong ESG performance can enhance financial metrics by improving operational efficiency, reducing risks, and attracting investment (Shmelev & Gilardi, 2025), others indicate mixed outcomes, particularly in emerging markets like Nigeria, where institutional frameworks and regulatory enforcement may be inconsistent (Ejoh, 2020). For instance, environmental reporting, which includes disclosures on emissions, waste management, and pollution control, may lead to increased costs in the short term, potentially straining cash flow margins. Similarly, social disclosures, such as investments in community development, may negatively impact financial performance if not strategically managed (Ejoh, 2020). Governance practices, including transparency and anti-corruption measures, are also critical in Nigeria, where weak institutional structures often undermine investor confidence (Okafor, et al., 2021).

Furthermore, the lack of standardized ESG reporting frameworks in Nigeria complicates the ability of oil and gas firms to consistently measure and communicate their performance, potentially leading to underreporting or misrepresentation of ESG impacts (Shmelev & Gilardi, 2025). This raises questions about whether ESG reporting translates into tangible financial benefits, such as improved cash flow margins, or if it imposes additional costs that erode profitability. Given the sector’s strategic importance and the global push toward sustainable practices, understanding the relationship between ESG reporting and cash flow margins is crucial for policymakers, investors, and corporate managers. This study seeks to address this gap by examining how ESG reporting influences the cash flow margins of listed oil and gas firms in Nigeria.

Consequently, there have been inconsistencies in the results of the previous studies. Some revealed that ESG reporting have positive impact on financial performance while some revealed negative impact on financial performance. These results have made it inconclusive as to whether ESG reporting improves performance or not. Therefore, the current examination focuses on total and individual ESG practices to provide comprehensive information regarding these practices, which could be beneficial for managers in identifying the link between the fulfillment of ESG responsibilities and financial performance.

Objectives of the study

The main objective of the study is to examine the impact of ESG reporting on cash flow margin of listed oil and gas firms in Nigeria. The specific objectives include:

• To examine the impact of environmental reporting on cash flow margin of listed oil and gas firms in Nigeria.
• To determine the impact of social reporting on cash flow margin of listed oil and gas firms in Nigeria.
• To assess the impact of governance reporting on cash flow margin of listed oil and gas firms in Nigeria.

LITERATURE REVIEW

Conceptual review

Concept of ESG

ESG refers to Environmental, Social, and Governance. It is an investment concept and enterprise evaluation standard that focuses on corporate environmental, social and corporate governance performance rather than traditional financial performance. The ESG framework aims to assess the sustainability of enterprises (Lunn, 2019). In recent years, ESG performance has gradually become the focus of attention of governments, regulators and investors. The international ESG concept and evaluation system mainly includes three aspects: the regulations of international organizations and exchanges on ESG disclosure and reporting, the rating of corporate ESG issued by rating agencies, and the ESG investment guidance issued by investment institutions.

The development of ESG has been solidified by new ESG focused policies which were introduced in the aftermath of the 2008 financial crisis, such as the commitment of governments to the UN’s Sustainable Development Goals (KPMG, 2020; Lunn, 2019). The European Commission has also issued a plethora of ESG-related regulations (KPMG, 2020). In 2020, the European Commission released the Action Plan for Financing Sustainable Growth, specifically focusing on improving sustainability-related issues in the finance sector by clarifying and improving transparency regarding sustainable investing for both asset managers and investors (KPMG, 2020). The fallout from the 2008 financial crisis and the desire for firms to be held accountable for their wider impact contributed to the development of integrated reporting, whereby previously separate ESG and sustainability considerations have come to be reported alongside financial reports (Moon & Herzig, 2012; Rowbottom & Locke, 2016). Integrated reporting has been evident since 2002, however it was not until the years following the 2008 financial crisis that the concept began to be solidified (Rowbottom & Locke, 2016). This ultimately culminated in the International Integrated Reporting Council (IIRC) releasing a standardisation framework in 2013 (ibid).

ESG as a concept has grown substantially in importance and prevalence since the beginning of the 21st century (Leins, 2020). This growth however has become even more pronounced, and developed at a larger rate, since the 2008 financial crisis (ibid). Due to the close connection between CSR, which focuses on firm actions, and ESG, which seeks to measure firm performance in regard to these issues (Ahmad, Mobarek, & Roni, 2021), it is intuitive that growth in the importance of CSR activities on a macroscale is cognate with growth in importance of measures of ESG performance.

Impact of Environmental, Social, and Governance (ESG) Reporting on Cash Flow Margins

Environmental, Social, and Governance (ESG) reporting has emerged as a pivotal framework for assessing the sustainability and ethical practices of corporations worldwide, including in Nigeria’s oil and gas sector. ESG reporting involves disclosing non-financial metrics related to environmental impact, social responsibility, and governance practices, which stakeholders use to evaluate a company’s long-term viability and ethical standing. In Nigeria, where the oil and gas industry is a cornerstone of the economy, the adoption of ESG reporting has significant implications for the cash flow margins of listed firms. Cash flow margin, a measure of a company’s ability to convert sales into cash, is critical for operational sustainability and investor confidence (Sassen, et al., 2016).

Environmental reporting, a core component of ESG, focuses on a firm’s impact on the environment, including emissions, waste management, and resource conservation. In Nigeria, oil and gas companies face intense scrutiny due to environmental degradation, such as oil spills and gas flaring, which have caused significant ecological damage in regions like Bayelsa State (Sassen, et al., 2016). A 2023 study found that robust environmental reporting positively impacts the net profit margins of Nigerian oil and gas firms, as it enhances stakeholder trust and reduces regulatory penalties (Shmelev & Gilardi, 2025). By investing in cleaner technologies and transparent reporting, firms can lower operational costs associated with environmental fines and remediation, thereby improving cash flow margins. For instance, adopting energy-efficient processes can reduce fuel costs, directly boosting cash flow. However, the initial capital expenditure required for such initiatives can strain short-term cash flows, particularly for firms with limited financial flexibility.

Social reporting addresses a company’s relationships with employees, communities, and other stakeholders. In Nigeria, oil and gas firms often face social unrest due to community dissatisfaction over resource exploitation and inadequate corporate social responsibility (CSR) efforts. Research by Ejoh (2020) on Nigerian manufacturing firms, which shares similarities with the oil and gas sector, indicates that social investments, such as community development projects, can negatively affect cash flows in the short term due to high upfront costs. However, these investments can enhance long-term cash flow margins by fostering community goodwill, reducing operational disruptions, and improving brand reputation. For example, firms that engage in transparent social reporting are less likely to face protests or sabotage, which can disrupt production and cash inflows. This dynamic is particularly relevant in Nigeria, where operational stability is critical for maintaining cash flow margins.

Governance reporting focuses on corporate transparency, board diversity, and anti-corruption measures. Strong governance practices are essential in Nigeria’s oil and gas sector, where issues like oil theft and mismanagement have historically eroded profitability (OpeBee, 2023). Governance disclosures significantly enhance financial performance in Nigerian financial organizations, a finding applicable to oil and gas firms (Shmelev & Gilardi, 2025). Transparent governance reduces the risk of financial mismanagement and fraud, which can drain cash reserves. For instance, effective governance frameworks ensure better allocation of resources, minimizing wasteful expenditure and improving cash flow margins. Moreover, firms with high ESG disclosure levels attract more investor capital, lowering the cost of financing and supporting cash flow stability (Kirchhoff, et al., 2024).

Despite these benefits, challenges remain. The lack of standardized ESG reporting frameworks in Nigeria complicates data comparability, potentially undermining investor confidence (Shmelev & Gilardi, 2025). Additionally, the high costs of implementing ESG initiatives can pressure cash flow margins, especially for smaller firms. However, the long-term advantages such as cost savings, enhanced reputation, and reduced risks tend to outweigh these costs. For instance, firms that align with international sustainability standards, as noted by Lagos State’s adoption of ISSB standards, are better positioned to attract global investors, improving cash flow through increased capital inflows (jidesanwoolu, 2024).

Theoretical framework

Stakeholder theory

Stakeholder theory was propounded by Freeman in the year 1984. The emergence of stakeholder theory was prompted by the growing recognition by boards of the need to take account of the wider interest of the society. He lists the essential premises upon which the stakeholder theory rests.   This theory maintains that the objectives and therefore results of the firm should be derived by balancing the conflicting aims of the various stakeholders in the firm: managers, workers, stockholders, suppliers, vendors. It implies that a board will be mainly interested in performance of the company in terms of meeting the expectations of stakeholders and ensuring that the reported results are beneficial to the shareholders. Such a board should be made up of directors with the right background and experience for effectiveness of their service function.

A basis for stakeholder theory is that companies are so large, and their impact on the society is so pervasive, that they should discharge accountability to many more sectors of the society than solely their shareholders; they should include employees, suppliers, customers, creditors, communities in the vicinity of the company’s operations, and the general public. Creditors have an interest in getting their loans repaid on schedule; suppliers have an interest in securing fair prices and dependable buyers; customers have a stake in getting value for money. Basically, this theory is used to help understand the groups and individuals that can affect, and are affected by, the achievement of an organization’s purpose, and those effects may be economic, regulatory, technological, social, political and managerial.

The value of ESG is supported by the stakeholder theory perspective. According to stakeholder theory, ESG leads to shareholder value maximization. Stakeholder theory is rooted in the notion that firms maintain reciprocal relationships with stakeholders, and that they will ideally be mutually supportive (ibid). From this perspective, ESG-enhancing activities are value-creating. These positive benefits of ESG lead to the firm benefitting from brand equity and stakeholder loyalty, which have been found to be higher amongst high ESG performing firms. Furthermore, stakeholder theory is rooted in the notion of ESG being used to develop relationships of trust with stakeholders, where ethical behaviour leads to positive long-term impact (McWilliams & Siegel, 2001). An important consideration regarding ESG in general is the notion that its benefit is more pronounced from a long-term perspective, rather than for short-term financial gain. In contrast with the stakeholder theory perspective, slack resource theory posits that whilst many studies have found a positive relationship between firm performance and ESG Scores, this may ultimately be due to resource slack. That is, firms invest in ESG enhancing activities due to having excess resources at their disposal (ibid).

Empirical review

Adejola, Joseph and Ojuola (2024) examined how sustainability reporting affects the financial performance of Nigerian-listed agriculture and natural resource companies. The study’s particular goals were to ascertain if reporting on economic and social sustainability had an effect on the financial performance of the sampled industries. The annual reports of nine (9) chosen firms were the source of the data from 2014 to 2023. Using the E-Views statistical program, the panel least squares regression approach was used to assess the data. The study found that the financial performance of the examined firms is negatively and insignificantly impacted by reporting on economic and social sustainability. The study concluded that sustainability reporting had no significant effect on the performance of Nigerian listed agriculture and natural resources firms. The research recommends that managers focus on measures that foster a rise in the attributes of economic and social sustainability.

Azlan, Munir, Behzad and Vani (2024) investigate the influence of sustainability reporting toward corporate reputation and the consequences in terms of financial performance in the sensitive and non-sensitive industry, grounded by the stakeholder theory. In addition, we intent to understand the moderating role of third-party assurance toward Sustainability Reporting and corporate reputation. A sample size of 200 enterprises in Malaysia was chosen using proportionate stratified random sampling to encompass each stratum of sensitive and non-sensitive sectors, and the data were analysed using partial least squares technique. The results confirmed that sustainability reporting has a positive effect on financial performance. However, this association is stronger in non-sensitive industries. Sustainability reporting has a significant impact on corporate reputation. Financial performance also can be predicted by corporate reputation in both sensitive and non-sensitive industries. The results also indicated that third-party assurance positively moderates the relationship between sustainability reporting and corporate reputation in both sensitivity and non-sensitivity industries. The results provided evidence of indirect effects of sustainability reporting on financial performance, mediated by corporate reputation. Current research is among the first attempts to compare the role of sustainability reporting, corporate reputation, third-party assurance, and financial performance in sensitive and non-sensitive industries.

Slam, Uddin, and Hossain (2024) investigates how environmental reporting impacts the performance of the Dhaka Stock Exchange (DSE) listed firms in Bangladesh. Data for the study was obtained using a random sampling technique from the annual reports of 177 companies listed on the DSE till the end of 2021. The results obtained from the multiple regression analysis show that environmental disclosers positively and significantly impact the market performance measured by the market performance tool, Tobin’s Q (TQ). However, the findings also imply that environmental disclosures are insignificant to impact on the firm financial performance assessed by return on equity (ROE) and earnings per share (EPS). The results show critical insights that can be used by DSE-listed firms, marketers, policymakers, shareholders, and stakeholders to maximize the advantages of environmental reporting.

Edoumiekumo (2024) examined the effect of corporate social and environmental spending on bottom line results. The analysis relied on information from the listed companies’ financial statements from 2010 to 2019. Linear regression was used for the analysis in this study. Based on the statistics presented, it appears that CSR reports have a negative effect on the ROI that was originally targeted. Corporate social environmental spending reporting also has a detrimental effect on the mandated return on assets and earnings per share. According to the findings, Nigerian investors are less interested in firms that use their profits to benefit society than they are in those that generate a high return on investment and perhaps offer a sizable dividend. More education and awareness on the topic of corporate social and environmental performance of the firms was recommended in the study rather than focusing on the shareholder group that is more inclined towards the profit motive of the firm. This is because it could change the perspectives of investors to place a high value on firms that consider the needs of all stakeholders, especially the society and environment where they operate.

Onyeka and Orajekwe (2023) carried out a study on the relationship between web based environmental disclosure and value of listed manufacturing firms in Nigeria. To determine the relationship between web based environmental disclosure (WED) and firm value, web based environment disclosure was measured using a dichotomous procedure adopted from GRI while firm value on the hand was proxy using price to book value (PBV). The study adopted Ex Post Facto Design and data were collected from the annual reports and accounts of listed manufacturing firms in Nigeria for the period ended; 2014-2021. The study used panel least square model as a statistical test tool. The findings of the study show that web based environmental disclosure (WED) has significant and positive effect on value (PBV) of listed manufacturing firms in Nigeria at 1% significant level.

Ayuba (2023) examined the impact of environmental and social disclosure on return on asset of listed oil and gas companies in Nigeria. The study used expo factor research. The population of the study comprises of all the thirteen (13) oil and gas companies and eight (8) of those companies made up the sampled population. The study used three variable, the dependent, independent and control variable. ROA is the dependent variable, environmental and social disclosure is the independent variable while firm size and firm age are the control variable. The study used secondary data sourced from annual report and account of the sampled companies for the period 2010 to 2019. To examine the study data, descriptive statistics, correlation matrix and multivariate regression analysis were used. The study revealed that environmental and social disclosure have negative impact on return on asset (ROA) of listed oil and gas companies in Nigeria.

Lawrence and Bernard (2023) investigated the relationship between environmental costs and financial performance in Nigeria. The main objective of the study is to empirically determine if waste management costs and communities development costs lead to better performance or not. The study covers the period between 2011 and 2020 and uses the Panel Estimated Generalized Least Squares (Panel EGLS) regression. Results show that waste management cost and communities development costs (CDC) as well as firm size (FSIZE) are positively significant while the moderated waste management costs (FS*WMC) and moderated communities development costs (FS*CDC) are negatively significant with NPM.

Okore (2021) examined the effect of environmental cost on the performance of some selected manufacturing firms in Nigeria using return on asset as a proxy for performance. Environmental training cost, donations and charitable cost, waste management cost and corporate social responsibility cost were used as proxy for environmental cost. Data were collected from the annual financial statement of the selected firms and the ex -post facto research design was adopted. The dependent and independent variables were observed over the period, 2011 to 2020. Stationarity of the data were tested using the Augmented Dickey-Fuller unit root test statistic and the data were analyzed using the Panel Least Square. The signs and significance of the regression coefficients were relied upon in explaining the nature and influence of the independent variable on the dependent variable as to determine both magnitude and direction of impact. Findings from the study showed that, environmental training cost, donations and charitable cost, waste management cost and corporate social responsibility cost had positive and significant impact on return on asset of manufacturing firms in Nigeria. The study therefore, concluded that environmental cost had positive and significant effect on the performance of manufacturing firms in Nigeria. The study therefore recommended that manufacturing firms should invest in environmental training, donations and charity, waste management and remain socially responsible to the host communities to ensure smooth and uninterrupted operations.

Summary of literature review

The literature review was grouped into three subheadings, the conceptual review, the theoretical review and the empirical review. The concepts focused on the concepts of ESG and how they affect cash flow margin of firms. The theories used include, the stakeholder theory and the principal agency theory. The empirical studies reviewed previous works carried out in relation to ESG. However, most of these studies focused on ESG on performance. Therefore, there are limited studies on ESG and cash flow margin and that’s the gap this study intends to fill.

METHODOLOGY

Research design

The research design adopted for this study is ex-post facto research design. This design was used because the researcher has no control over the exogenous variable and whatever happens occurred before the research. Furthermore, ex-post facto design is used when researchers are trying to ascertain the cause and effect of the relationships that exist between two variables. Therefore, ex-post facto research design involves the collection of data across firms on same key characteristics over specific time for the purpose of identifying a common trend of behavior amongst the firms.

Selection of data

The study used secondary data in the selection of data. The secondary data involved annual report and account of the various firms.

Collection of data

The data for this research was sourced from annual reports and accounts of the selected firms for the period of the study (2014 – 2023).

Population of study

The population of this study is made up of all the nine (9) oil and gas firms listed in Nigerian Exchange Group (NGX, 2020).

Sample size determination and Technique

Census sampling was used to select all the 9 oil and gas firms listed in Nigeria Exchange Group.

Data analysis technique

Descriptive and inferential statistical techniques were used. The descriptive statistics was used to describe and summarize the data set and also to check the normality of the data set. Finally, the study employed the panel data regression analysis model to understand the interaction among the variables and estimating the relevant data. Panel regression was used because the study involved the combination of cross sectional (9 oil and gas firms) and time series data (2014-2023).

Model specification

Using multiple regression analysis, the model is modified as follows

Where;

CFM = Cash flow Margin

ENV  = Environmental reporting

SOC  = Social reporting

GOV = Governance reporting

ESG  = Environmental, Social , Governance

i  = number of firms , t = given time

ANALYSIS AND DISCUSSIONS

Introduction

The study on the impact of ESG performance on cash flow margin of oil and gas firms in Nigeria was analyzed using multiple regression analysis with the help of SPSS software. ESG was used as the independent variable and it was measured using environmental activities (ENV), social activities (SOC) and governance (GOV). Cash flow margin (CFM) was used as the dependent variable of the study. The data used for the analysis is presented in appendix 2.

PRE-ESTIMATION TEST

Descriptive Statistics

Table 4.1

Source: SPSS output extracted from appendix 2

Table 4.1 presents the descriptive statistics of all the variables used for regression analysis. The number of observation for the study is 90. From the table above, the following information is distilled.

For environment (ENV), the result revealed maximum and minimum values of 0.50000 and 1.00000. ENV also reveals mean and standard deviation of0.759722 and 0.128774 respectively. Social (SOC)) has minimum value of 0.50000 and maximum value of 1.00000 with respective mean of 0.809722 and a deviation of 0.137988. Furthermore, governance (GOV) result reveals maximum and minimum values of 1.00000 and 0.60000 respectively. GOV also reveals mean and standard deviation of 0.960000 and 0.095752 respectively. For cash flow margin (CFM), the result revealed maximum and minimum values of 120.8124 and -19.42910 respectively. CFM also reveals mean and standard deviation of 6.227152 and -15.17070.

The data set’s normal distribution is determined using the normality test. Skewness and kurtosis were examined in this study as indicators of normality. Skewness was used to determine how asymmetric the series was. The show may be slanted in a positive or negative way or just generally.

When the skewness value exceeds the sample mean, the distribution is positive skewed and has a lengthy right tail. If there is no skewness, the distribution is considered to be normal because it is symmetrical around the mean. When a distribution has a long left tail and a negative skewness, the mean is lower. The results showed that the values for ENV, SOC, GOV and CFM skewness were -0.589901, -0.523014, -2.372239 and 5.727447 respectively. This implies that only CFM have a long right tail and a positive value and this significant that CFM have long right tail. While ENV, SOC, GOV have negative values that indicate a lengthy left tail.

Kurtosis is a statistic for assessing how flat or peaked the data are in comparison to a normal distribution. Kurtosis may be mesokurtic, leptokurtic, or platykurtic. A mesokurtic distribution, frequently referred to as a normal distribution, has a kurtosis of 3.0000. Kurtosis more than 3.0000 is referred to as leptokurtic or positive kurtosis, which has a peaked curve and produces higher values than typical. When the kurtosis is less than 3.0000, a flat curve with values that are lower than the sample mean is created. This is referred to as platykurtic or negative kurtosis.

Table 4.1’s findings for the dataset show that the kurtosis values for the variables ENV, SOC, GOV and CFM were 2.192308, 2.377804, 7.899654 and 43.54131, respectively. This reveals that GOV and CFM are leptokurtic, or positive kurtosis, which indicates that they produced results that were higher than the sample mean, while that of ENV and SOC are platykurtic, or negative kurtosis, which indicates that they generated findings that were lower than the sample mean.

As shown in the table above, ENV, SOC, GOV and CFM have Jargue-Bera statistics of 7.666121, 5.554876, 174.4376 and 6655.548 with its associated probability values 0.021643,  0.062198, 0.000000 and 0.000000 which indicates that the SOC meets normality assumption while ENV, GOV and CFM dis not.

Data analysis

IMPACT OF ESG ON CASH FLOW MARGIN 

Table 4.2: Regression result on the Impact of ESG on Cash flow Margin

Dependent Variable: CFM

Source: E-View Output Extracted from Appendix 1A and 1C

Table 4.1, presents the regression result on the impact of ESG (environmental, social and governance) reporting on cash flow margin (CFM). From the model summary table above, the following information can be distilled.

To enable the study chose between the fixed effect model and the random effect model, a Hausman Test is conduct with the comparable results placed in the appendix 1a. The result of the Hausman correlation test above shows a cross sectional random probability value of 0.4302 with a Chi-square statistic of 2.759312 which is significant thus informs the study decision to choose the random effect model.

The results of the multiple regression analysis using ordinary least squares showed the impact of environmental responsibility (ENV), social responsibility (SOC) and governance responsibility (GOV) on cash flow margin of oil and gas firms in Nigeria. The R² which measure the level of variation of the dependent variable caused by the independent variables stood at 0.090. The R² otherwise known as the coefficient of determination shows the percentage of the total variation of the dependent variable (CFM) that can be explained by the independent or explanatory variables (ENV, SOC, GOV). Thus the R² value of approximately 0.090 indicates that 9.0% of the variation in the CFM of listed oil and gas firms in Nigeria can be explained by a variation in the ESG performance while the remaining 92.0% (i.e. 100-R²) could be accounted by other factors not included in this model.

The adjusted R² of approximately 0.059 indicates that if other factors are considered in the model, this result will deviate from it by only 0.031 (i.e. 0.090 – 0.059). This result shows that there will be a further deviation of the variation caused by the independent factors to be included by 0.031%.

The regression result as presented in table 4.2 above to determine the relationship between ENV, SOC, GOV and CFM shows that when all the independent variables are held stationary; the CFM variable is estimated at 48.59857. This simply implies that when all independent variables are held constant, there will be an increase in the CFM of listed firms up to the tune of 48.59857% occasioned by factors not incorporated in this study. Thus, a unit increase in ENV will lead to a decrease in CFM by 3.233810%. For SOC, a unit increase in SOC will lead to an increase in CFM by 5.493071%. For GOV, a unit increase in GOV will lead to a decrease in CFM by 44.93140%.

Finally, the result shows that there is a significant variation of Fisher’s statistics (2.844313) at a significant value of 0.042389 which means the model as a whole is statistically significant at an autocorrelation level of 2.187916 (Durbin-Watson), which is less than 2.5.

The table showed that environmental reporting and social reporting have p-values greater than 0.05 which implies that environmental reporting and social reporting have no significant effect on cash flow margin. However, governance reporting has P-value less than 0.05 which implies that governance reporting has a significant effect on cash flow margin.

Discussion on findings

The findings from hypotheses one and two revealed that environmental reporting and social reporting have no significant effect on the cash flow margin of listed oil and gas firm in Nigeria.  The finding is consistent to the findings of Slam, Uddin, and Hossain (2024) which investigated how environmental reporting impacts the performance of the Dhaka Stock Exchange (DSE) listed firms in Bangladesh. Data for the study was obtained using a random sampling technique from the annual reports of 177 companies listed on the DSE till the end of 2021. The results obtained from the multiple regression analysis show that environmental disclosers positively and significantly impact the market performance measured by the market performance tool, Tobin’s Q (TQ). However, the findings also imply that environmental disclosures are insignificant to impact on the firm financial performance assessed by return on equity (ROE) and earnings per share (EPS). The results show critical insights that can be used by DSE-listed firms, marketers, policymakers, shareholders, and stakeholders to maximize the advantages of environmental reporting. Also, Edoumiekumo (2024) examined the effect of corporate social and environmental spending on bottom line results. The analysis relied on information from the listed companies’ financial statements from 2010 to 2019. Linear regression was used for the analysis in this study. Based on the statistics presented, it appears that CSR reports have a negative effect on the ROI that was originally targeted. Corporate social environmental spending reporting also has a detrimental effect on the mandated return on assets and earnings per share.

The findings in hypothesis three revealed that governance reporting has a significant effect on cashflow margin of oil and gas firms in Nigeria. The finding is consistent to the findings of Agbiogwu, Ihendinihu and Okafor (2016) studied the impact of environmental and social costs on performance of Nigerian manufacturing companies. Findings from the analysis showed that the sample companies environmental and social cost significantly affect Net profit margin, Earnings per share and Return on capital employed of manufacturing companies. The researchers recommended that government should ensure complete adherence of environmental laws by manufacturing companies in Nigeria.

CONCLUSIONS AND RECOMMENDATIONS

Conclusion

The study examined the effect of ESG reporting on cash flow margin of listed oil and gas firms in Nigeria. The previous chapters focused on the introduction, literature review, methodology and analysis of results respectively. The study adopted quantitative approach using secondary data. The data were generated from annual report and account of the 9 listed oil and gas firms in Nigeria. The data were analyzed using multiple regression analysis with the help using SPSS. The results revealed that environmental reporting and social reporting have no significant impact on cash flow margin of listed oil and gas firms in Nigeria. However, governance reporting has a significant impact on cash flow margin of listed oil and gas firms in Nigeria.

Recommendations

The researcher having gone through the process of the above-mentioned study, therefore, makes the following recommendations.

• In order to increase public awareness, it is advised that the government set benchmarks for classifying enterprises according to their ESG performance.
• Businesses are urged to report on sustainability as a matter of economics. Benefits may accrue in the future due to the influence of ESG performance’s potential for lag.
• In order to increase investor confidence, which will have an impact on cash flow margin, companies must tell investors and include ESG performance measures as part of firm performance.

REFERENCES

1. Adegbite, E., Guney, Y., Kwabi, F., & Tahir, S. (2019). Financial and corporate social performance in the UK listed firms: The relevance of non-linearity and lag effects. Review of Quantitative Finance and Accounting, 52(1), 105–158.
2. Adejola, P., Joseph, O. & Ojuola, O. (2024) Sustainability reporting and financial performance of listed agriculture and natural resources firms in Nigeria. International Journal of Social Science and Management Review, 7(2), 16-32.
3. Ademi, B., & Klungseth, N. J. (2022). Does it pay to deliver superior ESG performance? Evidence from US S&P 500 companies. Journal of Global Responsibility, 17(4), 421–449. https://doi.org/10.1108/JGR-01-2022-0006
4. Ahmad,N., Mobarek, A., & Roni, N.N.(2021). Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis. Cogent Business & Management,8(1),1–19.
5. Akgün,A.İ., & Memiş, K.A. (2021). Investigating the relationship between working capital management and business performance: Evidence from the 2008 financial crisis of EU-28. International Journal of Managerial Finance,17(4),545–567.
6. AlAmosh, H., Khatib, S.F.A., & Ananzeh, H. (2022). Environmental, social and governance impact on financial performance: Evidence from the Levant countries. Corporate Governance: The Inter-national Journal of Business in Society, ahead-of-print (ahead-of-print).
7. Alareeni, B. A., & Hamdan, A. (2020). ESG impact on performance of US S&P 500-listed firms. Corporate Governance: The International Journal of Business in Society, 20(7), 1409–1428.
8. Alex,P., & Andrew, P.(2018). Managerial ability, information quality, and the design and pricing of corporate debt. Review of Quantitative Finance and Accounting, 51(4), 1033–1069.
9. Allianz. (2019). How environmental, social, and governance issues impact consumers and investors. NewYork, USA: Allianz Life Company. https://www.allianzlife.com/-/media/files/allianz/pdfs/newsroom/fact-sheet-esg.pdf
10. Alqallaf, H., & Alareeni, B. (2018). Evolving of selected integrated reporting capitals among listed Bah- raini banks. International Journal of Business Ethics and Governance, 1(1), 15–36.
11. Azlan, A. Munir, A. Behzad, F. & Vani, T. (2024) Sustainability reporting toward corporate reputation and the consequences in terms of financial performance in the sensitive and non-sensitive industry, grounded by the stakeholder theory. Accounting, Corporate Governance and Business Ethics Research Article, 2(5), 40 – 59.
12. Baik, B., Choi, S., & Farber, D. B. (2020). Managerial ability and income smoothing. The Accounting Review,95(4),1–22.
13. Barnett, M. L., & Salomon, R. M. (2012). Does it pay to be really good? Addressing the shape of the relationship between social and financial performance. Strategic Management Journal, 33(11), 1304–1320.
14. Beddewela,E.,& Fairbrass, J. (2016). Seeking legitimacy through CSR: Institutional pressures and corporate responses of multinationals in Sri Lanka. Journal of Business Ethics, 136(3), 503–522.
15. Bitektine,A., & Haack, P. (2015). The “macro” and the “micro”of legitimacy: Toward amultilevel theory of the legitimacy process. Academy of Management Review,40(1),49–75.
16. Buallay, A., & Al Marri, M. (2022). Sustainability disclosure and its impact on telecommunication and information technology sectors’ performance: Worldwide evidence. International Journal of Emergency Services,11(3),379–395.
17. Carnini Pulino, S., Ciaburri, M., Magnanelli, B.S., & Nasta, L. (2022). Does ESG disclosure influence firm performance? Sustainability, 14(13), 7595.
18. Chen,L., Yuan, T., Cebula, R.J., Shuangjin, W., & Foley, M. (2021). Fulfillment of ESG responsibilities and firm performance: A zero-sum game or mutually beneficial. Sustainability, 13(19), 10954
19. Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857.
20. Edoumiekumo, A.R. (2024). Corporate social-environmental reporting and firm performance of listed firms in Nigeria. Journal of Accounting and Financial Management 9(6), 38-51.
21. Ejoh, N. O. (2020). Impact of Environmental, Social, and Governance Accounting on Firms’ Profitability and Cash Flow in Nigeria. SSRG International Journal of Economics and Management Studies, 7(12), 152-159.
22. Fauci, A. S., Lane, H. C., & Redfield, R. R. (2020). Covid-19 – navigating the uncharted. New England Journal of Medicine, 382(13), 1268–1269.
23. Ferrier, G. D. (1994). Ownership type, property rights, and relative efficiency. In A. Charnes, W. W. Cooper, A.Y. Lewin, & L.M. Seiford (Eds.), Data envelopment analysis: Theory, methodology, and applications (1st ed., pp. 273–283). Springer.
24. Fixler, T., Paradi, J. C., & Yang, X. (2014). A data envelopment analysis approach for measuring the efficiency of Canadian acute care hospitals. Health Services Management Research, 27(3-4), 57–69.
25. Geroski, P.A., Machin, S.J., & Walters, C.F. (1997). Corporate growth and profitability. The Journal of Industrial Economics, 45(2),171–189.https://doi.org/10.1111/1467-6451.00042
26. Godfrey, P. C., Merrill, C. B., & Hansen, J. M. (2009). The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic Management Journal, 30(4), 425–445.
27. Greening, D. W., & Turban, D. B. (2000). Corporate social performance as a competitive advantage in attracting a quality workforce. Business & Society, 39(3), 254–280.
28. Habib, A. M. (2022). Does the efficiency of working capital management and environmental, social, and governance performance affect a firm’s value? Evidence from the United States. Financial Markets, Institutions and Risks,6(3),18–25.
29. Habib, A. M., & Mourad, N. (2022). Analyzing the efficiency of working capital management: A new approach based on DEA-Malmquist technology. Operations Research Forum, 3(3), 20.
30. Habib, A. M., & Shahwan, T. M. (2020). Measuring the operational and financial efficiency using a Malmquist data envelopment analysis: A case of Egyptian hospitals. Benchmarking: An International Journal, 27(9), 2521–2536.
31. Han, J.-J., Kim, H. J., & Yu, J. (2016). Empirical study on relationship between corporate social responsibility and financial performance in Korea. Asian Journal of Sustainability and Social Responsibility, 1(1),61–76.
32. Hockerts, K., & Moir, L. (2004). Communicating corporate responsibility to investors: The changing role of the investor relations function. Journal of Business Ethics, 52(1), 85–98.
33. Hu, Y., Chen, S., Shao, Y., & Gao, S. (2018). CSR and firm value: Evidence from China. Sustainability,10(12), 4597. https://doi.org/10.3390/su10124597
34. Jensen, M. C. & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.
35. Kalia, D., & Aggarwal, D. (2022). Examining impact of ESG score on financial performance of health- care companies. Journal of Global Responsibility, 14(1), 155–176.https://doi.org/10.1108/JGR-05-2022-0045
36. Kirchhoff, K. R., Niefünd, S., & von Pressentin, J. (2024). ESG and its Impact on Financial Indicators. In ESG: Sustainability as a Strategic Success Factor, 4(1), 89–132.
37. Kumar, M., Vij, M., & Goswami, R. (2021). Effect of real earnings management on firm performance: Evidence from India. Vision: The Journal of Business Perspective, ahead-of-print(ahead-of-print), 1–16.
38. Lawrence, U. E., & Bernard, E. E. (2023). Environmental costs and financial performance of selected industrial goods firms in Nigeria: A moderated regression analysis approach. Fuoye Journal of Finance and Contemporary Issues, 4(1), 83-97.
39. Malik, M. (2015). Value-enhancing capabilities of CSR: A brief review of contemporary literature. JournalofBusinessEthics,127(2),419–438.
40. Mourad, N., Habib, A. M., & Tharwat, A. (2021). Appraising healthcare systems’ efficiency in facing COVID-19 through data envelopment analysis. Decision Science Letters, 10(3), 301–310.
41. Okafor, A., Adeleye, B. N., &Adusei, M. (2021). Corporate social responsibility and financial performance: Evidence from the oil and gas sector in Nigeria. Journal of Cleaner Production, 292.
42. Okpa, I. B., Agele, J., Nkwo, J. A., &Okarima, R. N. (2020). Implications of environmental, social and governance dimensions of CSR practice on firms’ profitability, value and cash flows in the UK. Journal of Business and Management (IOSR-JBM), 21(5), 01-10.
43. Onyeka, A.A. & Orajekwe, J.C.  (2023) The relationship between web based environmental disclosure and value of listed manufacturing firms in Nigeria. IIARD International Journal of Economics and Business Management, 9(2), 12-25.
44. OzataCanli, S. N., & Sercemeli, M. (2025). The impact of environmental, social and governance (ESG) disclosures on corporate financial performance in the energy sector. International Journal of Energy Sector Management, 6(2), 23-41.
45. Parkin, D., & Hollingsworth, B. (1997). Measuring production efficiency of acute hospitals in Scotland,1991-94: validity issues in data envelopment analysis. Applied Economics, 29(11), 1425–1433.
46. Potharla, S., Bhattacharjee, K., & Samontaray, D.P. (2021). Real earnings management and persistence of firm value: Evidence from India. The Journal of Asian Finance, Economics and Business, 8(12),323–336.
47. Qiu, Y., Shaukat, A., & Tharyan, R. (2016). Environmental and social disclosures: Link with corporate financial performance. The British Accounting Review,48(1),102116.https://doi.org/10.1016/j.bar.2014.10.007
48. Sassen, R., Hinze, A.-K., & Hardeck, I. (2016). Impact of ESG factors on firm risk in Europe. Journal ofBusinessEconomics,86(8),867–904.https://doi.org/10.1007/s11573-016-0819-3
49. Shahwan, T. M., & Habib, A. M. (2020). Does the efficiency of corporate governance and intellectual capital affect a firm’s financial distress? Evidence from Egypt. Journal of Intellectual Capital,21(3),403–430.
50. Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29(6), 569–592.
51. Shiller, R.J. (2013). Capitalism and financial innovation. Financial Analysts Journal,69(1),21–25.
52. Shmelev, S. E., & Gilardi, E. (2025). Corporate environmental, social, and governance performance: The impacts on financial returns, business model innovation, and social transformation. Journal  of Sustainability, 17(3), 1286.
53. Smith, M., Yahya, K., & Marzuki, A.(2007). Environmental disclosure and performance reporting in Malaysia. Asian Review of Accounting, 15(2), 185–199.
54. Tarmuji, I., Maelah, R., & Tarmuji, N. H. (2016). The impact of environmental, social and governance practices (ESG) on economic performance: Evidence from ESG score. International Journal Trade, Economics and Finance, 7(3),67–74.
55. Tu, J.-C., & Huang, H.-S. (2015). Analysis on the relationship between green accounting and green design for enterprises. Sustainability,7(5),6264–6277.
56. Ullmann, A. A. (1985). Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of U. S. firms. The Academy of Manage-mentReview,10(3),540–557.
57. Vandekerckhove, W., Leys, J., & Van Braeckel, D. (2008). A speech-act model for talking to management. Building a framework for evaluating communication within the SRI engagement process. Journal of Business Ethics, 82(1), 77–91.
58. Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169–178.