Research Objective: The study aimed to examine the correlation between environmental, social, and governance (ESG) factors and the corporate financial performance of oil and gas firms in Nigeria, focusing on corporate social responsibility (CSR) expenses, employees' compensation, and directors' remunerations.
Methodology: The study analyzed secondary data collected from the audited financial statements of five oil and gas firms listed on the Nigeria Exchange Group between 2013 and 2022. Using panel least square regression and correlation analysis, it evaluated the relationships between the selected ESG factors and profit for the year.
Findings: The analysis revealed that both CSR expenses and employees' compensation have a strong and positive correlation with profit, indicating that these factors significantly contribute to improved financial performance. However, the correlation between directors' remuneration and profit was positive but weak, suggesting a limited impact on financial outcomes.
Conclusion: The findings suggest that enhancing ESG factors, particularly CSR efforts and fair employee compensation, could increase the financial performance of oil and gas firms.
Recommendations: The study recommends that oil and gas firms in Nigeria should award more scholarships to indigent students in their host communities, construct additional infrastructure, and actively participate in other community development efforts to boost their corporate financial performance. Furthermore, firms should adopt competitive salary structures, implement pension and gratuity schemes, and invest in employee welfare services such as transport, medical care, and recreation. Additionally, firms should appoint qualified directors, compensating them fairly to ensure effective governance and mitigate corporate risk, ultimately improving corporate earnings.
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