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ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XII December 2025
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Moderating Effect of Board Characteristics on the Relationship
Between Renewable Energy Investment and Firm Performance
among Oil & Gas Firms in Sub Saharan Africa
Shehu Umar
1
, Ahmed Razman Abdul-latiff
2
, Rosalan Bin Ali
3
Putra Business School, Universiti Putra Malaysia
*
Corresponding Author
DOI: https://doi.org/10.47772/IJRISS.2025.91200017
Received: 10 December 2025; Accepted: 16 December 2025; Published: 31 December 2025
ABSTRACT
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.
Keywords: Firm performance, Investment, Renewable energy, Board characteristics, Oil & Gas.
INTRODUCTION
Oil and gas businesses are facing new challenges and new pressures related to their sustainability, which may
have a critical and long-term effect on investors and stakeholders in the industry (Rahi et al., 2023). The sector
faces the possibility of losing investment fund opportunities, which might result in negative consequences on
their financial performance and development plans, unless they incorporate sustainability measures into their
strategy (Grosu et al., 2023). Firm performance of the oil and gas industry is traditionally measured by financial
metrics, including profitability, return on assets, return on equity, return on investment, and market valuation
(Bajwa et al., 2023). However, in the context of sustainability performance, other indicators such as
environmental impact, social contribution, governance quality and investment in renewable energy have gained
prominence (Shaikh, 2022). Investors are more concerned about the accurate assessment of the company’s
performance, as they strive to make investments that will not only yield return but also bring significant increase
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ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XII December 2025
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in income with the lowest level of risk (Borodin et al., 2023). Investors use firm performance as a yardstick for
investment and decision-making because it guarantees that the business organisation has successfully met its
desired results and will remain competitive in the markets in the foreseeable future (Journal et al., 2022). Among
these challenges, renewable energy investment has gained significant attention due to its potential contribution
to companies' profitability and sustainability (IEA, 2023). This is also evident in the increased involvement of
investors in oil and gas companies' climate-related issues and restrictions in some areas on access to finance
(IEA, 2023). In addition, oil and gas firms require social legitimacy to build their projects and operate in their
business environment (García-Amate et al., 2023). In this regard, the global energy landscape driven by
increasing concerns about climate change, energy security, investment in renewable energy, is seen as an
essential channel to satisfy the yearning, needs, and expectations of all stakeholders to improve firm's
performance, firm’s reputation and attract more investors in the industry (Herzog-hawelka & Gupta, 2023;
Ramírez-orellana et al., 2023; Abel et al., 2023). The pressing need for sustainable energy solutions has
highlighted the implications of renewable energy investments, especially in energy-intensive industries like oil
and gas (Hartmann et al., 2022). Investments in renewable energy have become a critical component of the
industry's sustainability strategy, although usually much smaller than the investments in the core oil and gas
business projects; renewable energy investment can be viewed as buying the right to expand in the future (World
Energy Investment 2023). In Africa, the oil and gas industry will be increasingly measured by its ability to reduce
environmental footprint, engage with local populations in supply and distribution value chains, safety
development and diversify into new energy resources (International Energy Agency (IEA), 2023). Board
characteristics, including size, gender diversity, tenure, independence and expertise, play a critical role in
shaping strategic directions and ensuring accountability (Makpotche et al., 2023). In particular, a board’s
characteristics can moderate the relationship between renewable energy investments and firm performance. For
instance, boards with diverse expertise may more effectively drive renewable energy investments, influence the
extent and effectiveness of renewable energy projects and potentially enhance firm performance (Nepal & Deb,
2022). Conversely, boards lacking diversity or independence and expertise might prioritise traditional, short-
term profit motives over sustainable investments, limiting the potential positive impact on firm performance
(Saleh & Islam, 2020). Although there is an extensive body of literature that investigates the nature and extent
of energy transition, climate change sustainability (environmental, social and governance) practices in African
countries, for example (Bajwa et al., 2023; Mohammed et al., 2023; Obiso I. Evans, Maendo Densford, 2023;
Nwanwu et al., 2022; Okudo & Amahalu, 2023; Kwame et al., 2023; Adams et al., 2022; Bui & Nguyen,2021;
Ofoegbu & Onyebuenyi, 2022; Fabian et al., 2022; Ozdemir, 2021). None of these empirical studies examined
the relationship between board characteristics, renewable energy investment and firm performance of Africa's
oil and gas firms. Therefore, the purpose of this study is to investigate the relationship between board
characteristics, renewable energy investment and firm performance among oil and gas firms of sub-Saharan
Africa. Legitimacy and Resource dependence theories were used to guide the relationship.
LITERATURE REVIEW
Firm performance
The concept of a firm's performance is generic. A company's performance is determined by how well it meets
its market and financial objectives. Firm performance includes the firm's level of economic success (Alagbe et
al., 2021). The definition of a firm's performance theoretically centres on the economic view of the organisation's
profit maximisation and the stakeholders’ approach to satisfying the needs of a group or individuals affected by
the business organisation's activities. Also, firm performance is a subjective measure of how effectively and
efficiently a firm uses its assets to generate resources (Aiyesan, 2023). The financial performance of an
organisation is classified into subsets of Accounting or profitability performance measure (return on assets
(ROA), return on equity (ROE), return on investment (ROI), economic value added (EVA), net income/revenue
and earnings before interest, tax, depreciation, and amortisation margin (EBTIDA) and Net profit margin (NPM)
or market based measure of firm performance (earnings per share (EPS), change in stock price, dividend yield,
stock price volatility, market value added (MVA), and Tobin Q).
Transition to Renewable Energy
The energy transition is a gradual and lasting change in the composition of the worldwide energy system (Tjcd
et al., 2022). The energy transition is also referred to as the process of shifting from one dominant energy source
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to another (Fouquet & Pearson, 2012). Energy transitions were necessitated by various unavoidable global
forces. The first notable significant energy transition occurred between the 17th and the late 19th centuries, when
biomass energy (wood) gave way to fossil fuels. The necessity and acceleration of the transition process were
brought about by the discovery of new fossil fuel reserves, technological breakthroughs, and urbanisation
(Solomon & Krishna, 2011). Consequently, fossil fuels have emerged as the predominant source of worldwide
energy consumption. The world is currently going through its second major energy shift, which is defined as a
move away from fossil fuels like coal and oil and towards renewable energy sources such as solar, gas,
geothermal energy, and bioenergy. The goal of the transition to renewable energy is to lessen the negative effects
of using fossil fuels (Of & Sciences, 2020). The adverse impacts, such as climate change and air pollution, play
an important role in driving the global shift towards sustainable energy transition. Therefore, implementing an
energy transition is a very necessary and essential option to reduce greenhouse gas emissions (GHG), address
climate change, transition to a low-carbon energy system, and establish a sustainable socio-economic global
system (Tjcd- et al., 2022)
Renewable Energy Investment
The transition to low-carbon energy will mark the start of a new, environmentally friendly era (Pearson & Foxon,
2012). The environment, the world economy and society at large will all be greatly affected by the energy shift.
Oil and gas firms have been greatly impacted during this period. The demand for oil and gas is challenged by
the transition to renewable energy in the energy sector. Price of oil and gas is directly impacted by political
decisions and thus directly affects the financial performance of oil and gas firms (Of & Sciences, 2020). Hence,
the corporation should broaden its commercial scope by allocating resources towards the renewable energy shift.
Furthermore, the environmental measures outlined in the Paris Agreement, aimed at reducing global climate
change, have the potential to pose a significant risk to the financial stability and survival of oil and gas firms.
The implementation of the agreement's obligations is anticipated to result for reduction in future demand of
hydrocarbon energy, a growth in operational expenses due to rising taxes on CO2 emissions, and a negative
impact on the public image of oil and gas companies (Zhong & Bazilian, 2018). The investors' prioritisation of
environmental, social, and governance (ESG) metrics also contributes to the growing demand and shift to
renewable energy by oil and gas firms to diversify their business towards renewable energy projects (Marthinsen
et al., 2021). Therefore, in order to ensure economic stability and remain competitive in the energy market, it is
imperative for oil and gas corporations to actively invest more resources in the process of transitioning to
alternative renewable energy projects (Of & Sciences, 2020).
Board Characteristics
The board of directors (BOD) is a highly important internal governance body that plays a critical role in
monitoring and supervising organisational management, as well as protecting the interests of stakeholders. It is
used to supervise the company's strategic plans and verify that management is actively working towards
accomplishing the organisation's objective (Cheung & Lai, 2022). The literature emphasises that the board of
directors is a central and highly efficient internal mechanism of corporate governance (Shao, 2019). It serves
two significant functions in companies: monitoring executive management on behalf of the shareholders and
providing business resources and evaluation (Cheung & Lai, 2022). The boards fulfil their supervisory function
by dedicating their time and expertise in monitoring the performance of the firm and the conduct of the firm’s
executive managers (María & Isabel, 2019). As such, it is essential to comprehend the characteristics of the
board of directors (BOD) and also to assess their potential effect on firm performance. For example, oil and gas
firms should explicitly consider mechanism such as board gender diversity, board independence, board size,
board meetings, board financial knowledge or board expertise and board tenure for effective monitoring
strategies (Saleh & Islam, 2020; Mlay et al., 2023; Andrew O O, 2021).
Theoretical foundation
Legitimacy Theory
The legitimacy theory, developed by Davis (1973), posits that business is granted legitimacy and authority by
society (Meditari Accountancy Research Article Information, 2018). Any organisation that fails to exercise
power in a manner that is considered legitimate by society is likely to gradually forfeit that power. The view of
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legitimacy posits that organisations continually endeavour to adhere to the boundaries and societal norms of their
unique environments. Legitimacy theory posits that firms must exhibit environmental and social responsibility
and be answerable to society as a necessary condition for legitimate operations (Simnett et al., 2009; Cong &
Freedman, 2011).
Resource dependence Theory
Resource dependence theory was developed by Barney (1991). According to Wernerfelt (1984) and Remelt
(1984), the resource-based view (RBV) asserts that a firm's competitive advantage is essentially derived from
effectively using its collection of valuable resources. The core objectives of this theory are to explain the
relationship between a company's success and its possession of costly, scarce, inimitable, and non-substitutable
resources, which are acquired to attain a competitive advantage (Kountriasova, 2022). Based on theory, external
resources can influence the behaviour of an organisation, and various components of the corporate governance
system can facilitate the connection between the organisation and these external resources, hence enhancing the
organisation's performance (Pervin & Rashid, 2019). Growing sustainability concerns have, in recent years,
received significant and in-depth attention from investors and stakeholders across the globe. In this study, board
characteristics is expected to moderate significantly the relationship between renewable energy investment and
the firm performance of listed oil and gas firms in sub-Saharan Africa.
THEORETICAL FRAMEWORK
Figure 1Theoretical framework
Hypothesis Development
Relationship between Renewable energy investment and Firm financial performance
According to legitimacy theory, a company has an implied social contract within the society it operates (Velte,
2021). This social contract can motivate the board of directors to be in line with societal specific norms and
values. The boundary helps in implementing adequate investment decision-making processes (Velte, 2021). The
firm green investment increased societal support within the community it operates and hence gained acceptance
and legitimacy for future growth and development (Ofoegbu & Onyebuenyi, 2022); (Mahmood et al., 2019).
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Research has consistently indicated that firm performance is positively affected by a higher rate of investment
in green energy projects for example (Daferighe & Etim, 2023), (Marthinsen et al., 2021) investigates the effect
of green innovation on financial performance, (Zhong & Bazilian, 2018) study sustainable investment in
international oil and gas companies, the study finding indicates feasible technologies, and acquiring technical
capabilities to operate renewable power facilities has a positive significant effect on firm performance
(Nchofoung, 2023) examines the effect of oil price shocks on Africa’s energy transition, the findings show a
strong effect between rural and urban contexts of energy transition and firm performance (Kwame et al., 2023)
studied the safety practices and performance of critical sector in Ghana’s oil, gas and allied energy industry,
analysis of the result show that safety training and renewable investment has a significant contribution to safety
and firm performance. In contrast, (Rezende et al., 2019) examines how green innovation influence financial
performance in multinationals oil and gas firms, the study finding indicates insignificant relationship between
green innovation's and firm financial performance, (Marthinsen et al., 2021) investigates the effect of green
innovation on financial performance of oil and gas companies, the study indicates crude oil prices negatively
moderate the relationship between green innovation score and financial performance, (Hermundsdottir &
Aspelund, 2022) examines how sustainability practice such as investment in renewable energy, social and
environmental innovations influence firm performance of the manufacturing firms. The result indicates
environmental innovations has negative effect on all measures of firm performance, social innovations show a
mixed result, while investment in renewable energy resources show an insignificant positive effect on a
company’s economic returns and performance. The various previous studies indicated mixed findings between
renewable energy investment and financial performance. However, a strong relationship is needed to achieve
greater corporate sustainability. It is in line with this framework that the relationship between renewable energy
investment and the financial performance of oil and gas firms in sub-Saharan Africa is introduced in this research
study. Thus, the following hypothesis is developed to be tested.
Hypothesis 1 (H1): Renewable energy investment has a positive relationship on firm financial performance of
oil and gas firms in sub–Saharan Africa:
Board independence moderate the relationship between renewable energy investment and firm
performance.
Resource dependence theory argues that one of the main functions of the board is to provide effective response
and efficient advice toward acquiring new resources (Shyamanthi, 2018). The argument of advocates of resource
dependence theory is that, independent directors bring outside relationships that help the board with relationships
to overseas networks and bring new resources (Shyamanthi, 2018). Similarly, the robust presence of board
independent directors can reduce the rate of agency conflicts and attract more resources (Muniandy & Hillier,
2015; Shao, 2019). Increasing managers monitoring on their role in environmental, social and governance related
policies and investment in renewable energy, which have a significant positive effect on firm sustainability
(Fooladi, 2012). In the same direction, an independent board is always associated with diversity in skills,
experience and expertise (Cheung & Lai, 2022; Doni et al., 2022), independent board may address the conflict
of interest between different stakeholder’s interest group which thereby help to maintain the balance between
the financial and non-financial objectives of companies (Cheung & Lai, 2022). Hence, from the perspective of
legitimacy theory, independent directors’ ore likely to put greater pressure on top managers to carry out
sustainability-related programs in order to demonstrate firms’ obligation to the diverse interest groups within its
operating environment. In this regard, independent board are expected to be positively related with sustainable
investment, because independent directors are believed to be more determine as compared to non-independent
directors in terms of pressure from executives and shareholders (Kwarteng et al., 2023; Makpotche et al., 2023;
Lee, 2019; Shyamanthi, 2018; Bajwa et al., 2023; Rossi et al., 2021). However, some studies results indicate a
significant negative correlation between board independence and sustainability performance metrics (Kwarteng
et al., 2023; Hussain et al., 2018; Dong et al., 2023; Shyamanthi, 2018; Cormier & Beauchamp, 2021; Murtaza,
2020). Despite the mixed findings from the previous studies, increasing the proportion of independent directors
on the board is considered a positive development that may put pressure on companies to engage in sustainability
friendly practice (Bui & Nguyen,2021). Thus, the following hypotheses of the study are developed to be tested:
Hypothesis (H2): Board independence moderate positively the relationship between renewable energy
investment and firm financial performance of oil and gas firms in sub–Saharan Africa:
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Board of directors’ tenure moderate the relationship between renewable energy investment and firm
performance.
Board tenure is viewed as a measure of firm stability, since longer board tenure signals that the shareholders
have appointed and maintained a board with the relevant number of experience members (Livnat & Suslava,
2021). Similarly, Boards with the composition of directors with long tenure would monitor management and
help to provide additional resources to the firm (Livnat & Suslava, 2021). Further, previous empirical studies
(Kwarteng et al., 2023; Bui & Nguyen,2021; Cheung & Lai, 2022; Livnat & Suslava, 2021; Ozdemir, 2021;
Calgary, 2020) argue that if board members stay on the board for long period are likely to become satisfied with
the firms’ operations, particularly those concerning investment in new energy projects and sustainability practice
(Cheung & Lai, 2022). In contrast, corporate board are likely to suffer from long tenure, resulting in reducing
firm value and subsequently influence firms’ overall performance adversely (Jia et al., (2021). Similarly, a board
with long tenure is associated with an increase in familiarity among board members and company’s management.
This tries to undermine board independence and by implication, the firm’s sustainability becomes questionable
(Huang et al., 2018). This serves as our motivation to carry out this study in the context of the sub-Saharan Africa
(SSA) oil and gas sector, the sector is considered to be susceptible to the effects of global shift to new energy
dimension. Thus, the following hypothesis is developed to be tested.
Hypothesis (H3): Board tenure moderate positively the relationship between renewable energy investment and
firm financial performance of oil and gas firms in sub–Saharan Africa:
Board of directors’ expertise moderate the relationship between renewable energy investment and firm
performance.
Based on the legitimacy and resource dependence theories, the company board are encouraged to implement
firms plan accordingly to achieve firms’ objectives in the long run (Kwarteng et al., 2023). This is because the
company board members' skills and knowledge or expertise influences the firm’s overall objectives and ensure
improved firm's performance (Nugraha, 2023). This suggests that different or diversity of board members
especially, board expertise generally improves the quality of decisions making which in turn enables firm
managers to address numerous stakeholders’ interests, which subsequently increases firm value (Harun et al.,
2020; Kwarteng et al., 2023; Ojo et al., 2021; Lee, 2019; Dong et al., 2023; Mlay et al., 2023) studies finds that
board’s expertise has a positive effect on a firm’s performance. Similarly, (Makpotche et al., 2023; Kwarteng et
al., 2023; Bajwa et al., 2023; Miotto, 2020; Martín, 2019; Cheung & Lai, 2022) studies finds that board members
with a higher level of education or expert and skill members, including with wider experience have a positive
and significant effect on firms’ investment decision, particularly on new energy resources, corporate
environmental, social and governance performance. None of the existing studies has investigated the relationship
between board expertise, investment in renewable energy and firm performance in the context of sub-Saharan
Africa (S)SA oil and gas firms. Thus, the following hypothesis is developed to be tested:
Hypothesis (H4): Board expertise moderate positively the relationship between renewable energy investment
and firm financial performance of oil and gas firms in sub–Saharan Africa
Board gender diversity moderate the relationship between renewable energy investment, and firm
performance.
The composition of corporate boards has been given diverse interpretations, which generally relate to gender
diversity and female percentage of executive as against non-executive directors. This is extensively perceived
as a significant mechanism to influence management efficiency and impact board decisions making (Mlay et al.,
2023). Increasing the proportion of women directors is a vital and critical internal board mechanism that is often
connected to the promotion of sound and good corporate governance mechanism, which controls management
opportunistic interests (Kwarteng et al., 2023; Makpotche et al., 2023; Saleh & Islam, 2020; Pervin & Rashid,
2019; Dong et al., 2023; Mlay et al., 2023; Cheung & Lai, 2022; Mohammed et al., 2023; Martín, 2019; Lee,
2019; Assenga et al., 2018) studies potentially indicate female directors to be more sensitive to humanitarian
concerned like sustainability matters like investment in renewable energy projects, which can positively
influence firms' financial performance (Saleh & Islam, 2020). None of the prior previous empirical studies
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investigate the effect of board gender diversity, renewable energy investment and firm performance in sub–
Saharan Africa oil and gas firms, to the best of our knowledge. Therefore, this study investigated the relationship
between renewable energy investment and firm performance of oil and gas firms in sub–Saharan Africa. Thus,
the following hypothesis is developed to be tested:
Hypothesis (H5): Board gender diversity moderate positively the relationship between renewable energy
investment and firm financial performance of oil and gas firms in sub–Saharan Africa:
RESEARCH METHODOLOGY
Research Design
To identify the statistical relationship between the moderating effect of board characteristics, renewable energy
investment and firm performance of oil and gas firms in sub–Saharan Africa, a correlation research design is
used in this study. It is considered to be the most appropriate research design for the study, since it allows for
the testing of anticipated relationships between variables as well as the deduction of logical inferences about
those relationships (Park et al., 2020).
Population, Sampling and Method of data collection
The study employed a secondary source of data to test the above study stated hypothesis by collecting the data
from LSEG data stream and published audited annual reports and accounts of sample oil and gas firms in sub-
Saharan Africa from the period 2014 to 2023. The population of the study comprise of fifty (50) oil and gas
firms operating in Nigeria, Ghana, Angola, Namibia, Kenya, Uganda and Egypt.
Techniques of Data Analysis.
A panel data linear multiple regression analysis technique is used to test the moderating effect of board
characteristics on the relationship between renewable energy investment and the firm's financial performance
among oil and gas firms in sub-Saharan Africa, with the aid of the STATA statistical software package.
Control variables
Firm Size
Firm size is a firm characteristic usually determined by the natural logarithm of assets, net sales, or employees.
As indicated by (Nicholson, 2007). The size of the company matters and can influence performance. It is related
to overall profitability and incurred costs for the industry. Energy sector, i.e. oil & gas firms, is more likely to
have numerous departments managed by line managers, who are more qualified or unqualified in terms of skills
and knowledge and thus have much bureaucracy; this will significantly affect the firm performance (Akuno,
2018).
Firm Leverage
Leverage is an investment technique that requires borrowing funds. It involves utilising a range of financial
instruments or borrowed capital to improve the potential return on investment (A. Ali & Fatima, 2023). Leverage
is the term commonly used to describe the level of debt that a company uses to fund its assets. When a firm
determine to increase its asset base and generate profits from invested capital, it can source funding from
borrowed capital in the financial markets (James & A, 2023). The use of debt (borrowed capital) to finance a
business or task is known as leverage. Hence, the potential returns of the project are increased (Asika, 2022).
Simultaneously, leverage increases the downside firm risk, but if the business does not produce any results
leverage can be used to provide financial support for a company's assets (Asika, 2022). In contrast to issuing
shares for capital raising, businesses have the option to use debt financing to invest in their operations and
increase shareholder value. In this situation, investors apply leverage to increase their potential returns on
investment (Asika, 2022).
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Table 3.1 Model Variable Description and Measurement
Variable
Mnemonics
Definition
Role
ROA
ROA
it
Return on assert
Dependent variable
NPM
NPM
it
Net profit margin
Dependent variable
REI
REI
it
Renewable energy
investment
Independent
variable
BOIND
BOIND
it
Board Independence
Moderating variable
BOT
BOT
it
Board Tenure
Moderating variable
BOEXP
BOEXP
it
Board Expertise
Moderating variable
BOGND
BOGND
it
Board Gender
Moderating variable
FL
FS
it
Firm Leverage
Control variable
FS
LEVit
Firm Size
Control variable
β0
Constant
β1-5
Coefficient of independent
variables
ε
it
Error Term
I
Firm under consideration
T
Time period in a year
In this study, the regression models equation (1a and 1b) is used to measure the direct relationship between
renewable energy investment and firm financial performance.
Regression Models
ROA
it
= β
0 +
β
1
REI
it +
β
2
FL
it +
β
3
FS
it +
ε
it. …………………………………………………………………...….... (
1a)
NPM
it
= β
0 +
β
1
REI
it +
β
2
FL
it +
β
3
FS
it +
ε
it ….......................................................................................................
(1b)
The Regression models used to measure the moderating effect of board characteristics are stated in equation
2,3,4 and 5.
ROA
it
= β
0
+ β
1
REI
it
+ β
2
BOIND
it
+ β
3
REI
it X
BOIND
it
+
β
14
FL
it
+
β
5
FS
it
+ ε
it……………..……..…..
(2a)
NPM
it
= β
0
+ β
1
REI
it
+ β
2
BOIND
it
+ β
3
REI
it X
BOIND
it
+ β
4
FL
it
+
5
β5FS
it
+ ε
it……………..……..…..
(2b)
ROA
it
= β
0
+ β
1
REI
it
+
β
2
BOT
it
+ β
3
REI
it X
BOT
it
+
β
4
FL
it
+
β
5
FS
it
ε
it………………………………………
(3a)
NPM
it
= β
0
+ β
1
REI
it
+
β
2
BOT
it
+ β
3
REI
it X
BOT
it
+
+
β
4
FL
it
+
β
5
FS
it
+ ε
it…………………..………..…..
(3b)
ROA
it
= β
0
+ β
1
REI
it _
+ β
2
BOEXP
it
+ β
3
REI
it X
BOEXP
it
+
β
4
FL
it
+
β
5
FS
it
+ ε
it….……………...……..
(4a)
NPM
it
= β
0
+ β
1
REI
it _
+ β
2
BOEXP
it
+ β
3
REI
it X
BOEXP
it
+
β
4
FL
it
+
β
5
FS
it
+ ε
it….…………………..
(4b)
ROA
it
= β
0
+ β
1
REI
it +
β
2
BOGND
it
+
β
3
REI
it X
BOGND
it
+
β
4
FL
it
+
β
5
FS
it
+ ε
it…………………….……..
(5a)
NPM
it
= β
0
+ β
1
REI
it +
β
2
BOGND
it
+
β
3
REI
it X
BOGND
it
+
β
4
FL
it
+
β
15
FS
it
+ ε
it………………………..
(5b)
Diagnostics Test
In this study, the relationship between board characteristics, renewable energy investment and firm performance
among oil and gas firms in sub-Saharan Africa, the study conducted the following Diagnostic tests:
The skewness and kurtosis test that shows the data is normally distributed across the cross-section, statistics
suggest that independent and dependent variables are acceptably close to being normally distributed (Ojo et al.,
2021). Skewness is a measure of the normal distribution's symmetry, or more accurately, its lack of symmetry.
Kurtosis is a measure of the peakiness of a distribution. Sometimes the term "kurtosis" (proper) refers to the
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initial kurtosis value. If a distribution or data set appears the same to the left and right of the centre point, it is
said to be symmetric. A symmetric distribution is one in which the mean, median, and mode all match i.e,
skewness = 0, and kurtosis (excess) = 0. A distribution is considered approximately normal if the skewness or
kurtosis (excess) of the data falls between 1 and +1 (Mishra et al., 2019).
Multicollinearity tests were also carried out to determine the correlation among the study's independent variables.
However, the VIF result indicates the non-existence of multicollinearity. Multicollinearity put simply, if there is
a strong and consistent linear relationship between the predictor variables, then it suggests the presence of
multicollinearity. The regression analysis might present a problem in determining the unique individual impact
of each independent variable on the dependent variable. Multicollinearity can result in imprecise and unstable
coefficient estimates, rendering the interpretation of results and the attainment of a meaningful conclusion from
the model. Observing and addressing multicollinearity is required for the validity and reliability of regression
models (Mishra et al., 2019).
Homoskedasticity is one of the assumptions of multiple linear regression models that states the variance of the
errors must be constant. If the data do not have a constant variance, the data are said to be heteroskedastic
(Gujarati & Porter 2009). Therefore, a Hausman specification test was conducted using the White
Heteroskedasticity-Consistent Standard Errors & Covariance test. Because of the presence of heteroskedasticity
in the data set, the pooled OLS model cannot stand for generalisation. The study conducted an Autocorrelation
test to determine the serial correlation. Serial correlation is a statistical term used to describe the situation when
the residual is correlated with lagged values of itself, which is not desirable (Nepal & Deb, 2022). In this study,
the Breusch-Woodridge test has been applied to check the serial autocorrelation. Therefore, due to the presence
of heteroskedasticity among the sample firms and the existence of autocorrelation issues in the data set, the study
further conducted a panel corrected standard error to overcome both the heteroskedasticity and serial
autocorrelation in the data set
RESULT AND DISCUSSION.
Table 4.1 Descriptive Statistics
Variable
Obs
Mean
Std. Dev.
Min
Max
Roa
500
0.066
0.058
0.001
0.310
Npm
500
3.868
2.839
0.190
13.800
Rei
500
3.701
3.008
0.000
7.350
Boi
500
0.589
0.216
0.200
0.990
Bot
500
5.340
2.038
2.000
8.000
Boe
500
0.377
0.157
0.100
0.890
Bog
500
0.234
0.134
0.000
0.8000
Fse
500
7.052
0.807
5.530
10.320
Lev
500
1.098
0.981
0.080
4.720
Table 4.2 Matrix of correlations
Variables
-1
-2
-3
-4
-5
-6
-7
-8
-9
(1) roa
1
(2) npm
0.081*
1
(3) rei
-0.143***
0.116*
1
(4) boi
0.128***
0.090**
0.113**
1
(5) bot
0.041
0.011
0.132***
0.038
1
(6) boe
-0.122***
0.237***
0.114**
-0.021
-0.139***
1
(7) bog
-0.007
0.250***
0.200***
0.210***
-0.079*
0.447***
1
(8) fse
0.104**
-0.002
-0.287***
-0.012
-0.094**
0.022
0.105***
1
(9) lev
-0.096**
-0.276***
-0.01
-0.06
0.091**
-0.272***
-0.25
0.056
1
*** p<.01, ** p<.05, * p<.1
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Table 4.3 Summary of Linear regression, correlated panels corrected standard errors (PCSEs)
(1) roa
(2) Npm
(3) roa
(4) Npm
VARIABLES
model
Model2
Model3
Model4
Rei
-0.00249***
0.0658**
-0.00794**
-0.333***
(0.000929)
(0.0294)
(0.00403)
(0.109)
Boi
0.0339***
0.600
0.0248
0.590
(0.00865)
(0.402)
(0.0187)
(0.662)
Bot
0.00155
0.0673
0.000434
0.0266
(0.00119)
(0.0454)
(0.00203)
(0.0912)
Boe
-0.0528***
2.265***
-0.0130
-0.905
(0.0136)
(0.776)
(0.0320)
(1.546)
Bog
0.00823
2.516**
-0.108***
1.557
(0.0183)
(1.182)
(0.0233)
(1.612)
Reixboi
0.000889
0.0179
(0.00362)
(0.140)
Reixbot
0.000214
0.0129
(0.000331)
(0.0200)
Reixboe
-0.00915
0.689***
(0.00628)
(0.260)
Reixbog
0.0317***
0.305
(0.00651)
(0.314)
Fse
0.00594**
0.0694
0.00450
0.0736
(0.00266)
(0.118)
(0.00286)
(0.123)
Lev
-0.00787***
-0.620***
-0.00740***
-0.635***
(0.00276)
(0.167)
(0.00265)
(0.186)
Constant
0.0316
1.659
0.0617**
3.171**
(0.0225)
(1.248)
(0.0272)
(1.455)
Observations
500
500
500
500
R-squared
0.075
0.131
0.111
0.147
Number of company code
50
50
50
50
Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
Relationship between Renewable energy investment and Firm financial performance
In hypothesis one (H1), it is assumed that renewable energy investment has a positive relationship with firm
performance of oil and gas firms in sub–Saharan Africa, whereas the finding, specifically, indicates renewable
energy investment shows a significant negative relationship with ROA (β = –0.00249, p < 0.01). This finding is
not unusual because it is in line with the previous studies of (Kaupke & K, 2023; Ganda & Milondzo, 2018),
suggesting a potential decrease in return on assets due to capital intensiveness of renewable energy investment
for oil and gas firms in sub–Saharan Africa. However, the same investment in renewable energy indicates a
strongly significant positive impact on net profit margin (β = 0.0658, p < 0.05). This finding is in line with the
studies of (Daferighe & Etim, 2023; Marthinsen et al., 2021; Kwame et al., 2023 and Mahmood et al., 2019),
indicating improved profitability relative to revenue. This implies that while renewable energy initiatives may
initially burden asset returns, they contribute positively to long-term profitability, likely through operational
efficiencies, reputational gains, or cost savings. Thus, hypothesis H1 is therefore accepted. Consequently,
renewable investment appears to be a strategically right decision for oil and gas firms in sub-Saharan Africa,
particularly when long-term performance is prioritised.
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Moderating role of Board Independence on the relationship between Renewable energy investment and
Firm financial performance.
The empirical result reported in Table 4.8.2 above indicates the regression results of moderating effects of board
independence on the relationship between renewable energy investment and firm performance of oil and gas
firms in sub–Saharan Africa. Specifically, before the interaction, board Independence (BOIND) with (β =
0.000889 and β = 0.0179) indicates board independence has an insignificant relationship with ROA and NPM;
the study result is consistent with the studies of (Nepal & Deb, 2022; Muniandy & Hillier, 2015 and Murtaza,
2020). The positive insignificant relationship means that as the board has many independences directors, ROA
and NPM are not affected, implying that oil and gas firms in sub–Saharan Africa, independent directors focus
more on compliance, monitoring, and risk control rather than aggressive profit-maximisation motives. The result
of the regression after the interaction indicates a positive, insignificant relationship between the moderating
effect of BOIND and REI on ROA and NPM with (β = 0.00362 and β = 0.140), which is consistent with the
study of (Makpotche et al., 2023; Murtaza, 2020 and Bezawada & Adavelli, 2020).
Moderating role of Board Tenure on the relationship between Renewable energy investment and Firm
financial performance
The hypothesis four (H4) of the research study where it is anticipated that Board tenure moderate positively the
relationship between renewable energy investment and firm financial performance of oil and gas firms in sub–
Saharan Africa: The result on table 4.8.3 above indicate the regression results of the moderating effects of board
tenure on the relationship between renewable energy investment and firm performance of oil gas firms in sub–
Saharan Africa. Specifically, before the interaction, board tenure (BOT) with (β = 0.000434, 0.0266) has a
positive, insignificant relationship on ROA and NPM, which is consistent with the studies of (Huang et al., 2018;
Jiao Jia, Hongfeng Peng∗b, Hanwen Sunc, 2021; Livnat & Suslava, 2021 and Livnat & Suslava, 2021). This
implies that longer board tenure is not associated with a substantial decrease or increase in profitability margins
(NPM) and return on assets. The result of the regression after the interaction also indicates a positive,
insignificant relationship between the moderating effect of BOT and REI on ROA and NPM with (β = 0.000214,
0.0129). These findings are in line with the previous research study of (Livnat & Suslava, 2021). This implies
that board independence does not influence renewable energy investment to increase or decrease either return
on assets or profitability of oil and gas firms in Sub-Saharan Africa.
Moderating role of Board Expertise on the relationship between Renewable energy investment and Firm
financial performance.
The empirical result reported in Table 4.8.4 above shows the regression results of the moderating effects of board
expertise on the relationship between renewable energy investment and firm performance of oil and gas firms in
sub–Saharan Africa. The finding shows before the interaction, board expertise (BOE) has a negative insignificant
relationship on ROA and NPM with (β = -0.0130, -0.905), the study is in consistent with the previous studies of
(Kwarteng et al., 2023; Mlay et al., 2023; Nugraha, 2023; Shyamanthi, 2018 and Assenga et al., 2018), this
indicates that while expertise is expected to enhance decision-making, the result shows that oil and gas firms
board with expertise may instead not reduce profitability and eturn on asset of oil and gas firms in sub-Saharan
Africa, because expert may prioritize compliance, risk control, and sustainability over aggressive profit-seeking.
The regression result after the interaction indicates a negative and insignificant relationship between the
moderating effect of BOE and REI on ROA wβ = -0.00915), which is usual and in line with the studies of (Bajwa
et al., 2023), (Miotto, 2020), (Martín, 2019) and (Cheung & Lai, 2022). While the finding further shows board
expertise moderately positively the relationship between REI and NPM and statistically significant at 1% level
with (β = 0.689, p < 0.01). This finding is in line with the previous studies of (Calgary, 2020; Makpotche et al.,
2023 and Cheung & Lai, 2022), implying that board expertise does not seem to reduce the ROA of firms, with
which renewable energy investments translate into returns on assets. This could be because renewable energy
investments are long-term strategic projects, and their financial benefits do not immediately reflect on ROA.
Similarly, oil and gas firms with more expert boards can utilise renewable energy investments into higher profits,
which helps boards evaluate, guide, and oversee renewable energy projects in ways that improve cost efficiency,
attract renewable energy-focused investors, and open up revenue opportunities (e.g., carbon credits, cleaner
production advantages).
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Moderating role of Board Gender Diversity on the relationship between Renewable energy investment
and Firm financial performance
Based on the empirical result in Table 4.8.5 above, hypothesis six (H6) where it is expected that board gender
diversity moderates positively the relationship between renewable energy investment and firm financial
performance of oil and gas firms in sub–Saharan Africa. The hypothesis six (H6) is accepted, because the study
result indicates, specifically, before the interaction, board gender diversity (BOG) has a negative relationship
and statistically significant at 1% level of significance on ROA (β = -0.108, p < 0.01) this finding is in line with
the previous studies of (Saeed & Sameer, 2017), (A. M. Ali & Aminu, 2021) similarly from the results board
gender diversity has a positive and insignificant relationship on NPM with (β = 1.557 ), the result is in consistent
with the studies of (Saleh & Islam, 2020), (Asikhia et al., 2023; Governance, 2018) this implies that increasing
board gender diversity is associated with a decrease in return on assets (ROA), which means gender diversity
may be more symbolic than functional and lack influence in decision-making in oil and gas firms in sub Saharan
Africa. Similarly, gender diversity does not increase the profitability of oil and gas firms in the region. But the
regression result after the interaction indicates gender diversity moderates positively and has a significant
relationship between REI and ROA of oil and gas firms in sub–Saharan Africa, with (β = 0.0317, p < 0.01), and
the moderating effect of gender diversity has an insignificant positive relationship between REI and NPM with
(β = 0.305). The result is in consistent with the findings of the previous studies of (Makpotche et al., 2023;
Muhammad et al., 2020; Saleh & Islam, 2020 and Calgary, 2020), this implies that when firms have more gender-
diverse boards, their renewable energy investments initiative are more likely to improve asset returns, which
means female directors may bring new perspectives, stakeholder-oriented thinking, and renewable energy
commitment, which help align renewable energy projects with operational and financial efficiency. Similarly,
while board gender diversity also may not enhance the effect of renewable energy investment on profitability
margins (NPM), the effect on margins is less consistent, which is likely due to high costs of renewable energy
projects or the long payback period typical in the oil & gas sector of sub-Saharan Africa.
CONCLUSION
The findings show the financial effect of renewable energy investment among oil and gas firms in sub-Saharan
Africa. In the short term, investment in renewable projects decreases returns on assets, largely due to high capital
requirements and long payback periods. However, in the long run, renewable energy investments improve firms’
profitability, as firms benefit from increased energy efficiency, enhanced corporate reputation, and limited
exposure to environmental and regulatory-related risks. The study concludes that board independence does not
moderate the relationship between renewable energy investment and firm performance of oil and gas firms in
sub–Saharan Africa, implying that, while board independence strengthens governance credibility, independent
directors may not be actively engaged in bringing or facilitating renewable energy projects that could improve
firms’ financial performance. The study concludes that board tenure does not significantly moderate the
relationship between renewable energy investment and firm financial performance among the oil and gas firms
in sub-Saharan Africa. Although directors with longer tenure may contribute valuable experience, bring stability,
excessive long tenures may reduce directors’ motivation to pursue innovative or high-risk sustainable
investments that can enhance long-term profitability in the oil and gas industry. The result further concludes that
board expertise plays a different moderating effect in the relationship between renewable energy investment and
firm performance among oil and gas firms in sub-Saharan Africa. Specifically, board expertise is better
positioned to guide investment in renewable energy projects in a way to improves long-term financial stability
and market competitiveness, rather than immediate asset returns. The study also concludes that board gender
diversity moderates the relationship between renewable energy investment and firm performance of oil and gas
companies in sub–Saharan Africa. Female directors on the board contribute to better evaluation, good oversight
and innovative investment decisions in renewable energy projects with sustainability and financial objectives.
Policy Implications
Governments in sub-Saharan Africa should design financial incentives, for example, tax reliefs, subsidies, and
low-interest green financing, to mitigate the high costs of renewable energy projects. This will encourage greater
adoption among oil and gas firms in the region.
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The oil and gas firms in sub–Saharan Africa should diversify their energy portfolios to gradually shift from
carbon-intensive activities toward renewable energy projects for long-term stability and compliance with global
decarbonization sustainable goals.
The firms should give emphasis to board training, capacity development for directors to deepen their knowledge
on the implications of renewable energy initiatives within the oil and gas sector. Also, policymakers should
review and enhance corporate governance codes to ensure that directors not only perform oversight roles but
also contribute to strategic innovation, energy transition planning, and performance evaluation.
SUGGESTION
This study is limited to only one factor, i.e renewable energy investment. Future studies could extend the model
to include social and environmental performance metrics to provide a more holistic understanding of how board
characteristics influence the relationship between other factors on the financial performance of oil and gas
companies.
Another limitation is that this study limited itself to one sector. Therefore, comparative studies across different
sectors (e.g., manufacturing, utilities, or mining) could also reveal whether the moderating effects result are
unique to the oil and gas sector only.
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