Environmental Responsibility and Firm Financial Performance: Evidence from International Oil Companies in Niger Delta

This study examines the relationship between environmental responsibility and financial performance of international oil companies in Niger Delta region of Nigeria. In pursuance of this, a sample of twelve (12) international oil firms was used for the study. Secondary data were obtained from the audited annual financial reports of the selected companies and Federal Ministry of Environment covering the period of 2009 to 2018. The data were analyzed using descriptive statistics, correlation analysis, panel causality test and fixed effect, selected as the appropriate strategy after using the Hausman test. Based on the data analysis, the study reveals that there is a bi-directional relationship between environmental responsibility and firms’ financial performance. The study further reveals that there is a positive relationship between environmental responsibility and firms’ financial performance. When environmental responsibility interacts with corporate governance, the impact is found to have a significant positive relationship with firms’ financial performance. The study also finds that growth opportunities and firm size are positively and significantly related to firms’ financial performance. Based on the findings, the study recommends effective regulation, strong institutional mechanism and good corporate governance structures to enforce or engender environmental sustainability and compel firms to adopt the culture/strategy of sustainable finance. Such strategy will alleviate the curse of dependency and poverty that comes with the destruction of the environment and the means of sustenance of the people in oil producing communities.

JEL Classification: C23, G30, N57.