THE IMPACT OF ESG PRACTICES ON THE RISK PORTFOLIO OF LISTED OIL AND GAS FIRMS IN NIGERIA USING A MULTILAYERED CRITERION

Authors

  • Joseph Olorunfemi Akande Department of Accounting Science, Walter Sisulu University, Mthatha, South Africa

DOI:

https://doi.org/10.57233/gujaf.v5i2.09

Keywords:

ESG practices, risk portfolio, multilayered criterion, listed oil and gas firms

Abstract

This study investigates the impact of Environmental, Social, and Governance (ESG) factors on the risk-adjusted returns of Nigerian oil and gas firms listed on the Nigerian Exchange Group (NGX) over a 11-year period (2012–2022). The study was anchored on signalling theory. Utilizing a correlational research design, data was collected from eight firms meeting inclusion criteria, focusing on ESG scores as independent variables, with Firm Size as a control variable, and risk-adjusted returns as the dependent variable. Diagnostic tests ensured adherence to Best Linear Unbiased Estimator (BLUE) assumptions. Employing both Ordinary Least Squares (OLS) and Two-Stage Least Squares (2SLS) regression techniques, the study addresses potential endogeneity, using industry norms as an instrumental variable (IV) in the 2SLS model. Findings indicate significant, positive relationships between ESG factors and risk-adjusted returns, emphasizing the financial viability of sustainable practices in a sector known for environmental and social risks. Hence, to strengthen financial and operational resilience, Nigerian oil and gas firms are encouraged to prioritize robust environmental practices, including emission reduction, waste management, and prevention of oil spills. Given the social challenges in regions like the Niger Delta, firms should focus on building trust and maintaining positive relationships with local communities through initiatives in healthcare, education, and infrastructure. This study provides key insights into how ESG engagement in Nigerian oil and gas firms may influence firm stability, resilience, and investor confidence, underscoring the role of signalling theory in linking ESG performance to enhanced corporate valuation.

Author Biography

Joseph Olorunfemi Akande, Department of Accounting Science, Walter Sisulu University, Mthatha, South Africa

Department of Accounting Science, Walter Sisulu University, Mthatha, South Africa

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Published

2025-01-30

How to Cite

Akande, J. O. . (2025). THE IMPACT OF ESG PRACTICES ON THE RISK PORTFOLIO OF LISTED OIL AND GAS FIRMS IN NIGERIA USING A MULTILAYERED CRITERION . Gusau Journal of Accounting and Finance, 5(2), 143-155. https://doi.org/10.57233/gujaf.v5i2.09