Climate change disclosure and financial performance of quoted oil & gas firms in Nigeria
Abstract:
Purpose: Prior research has demonstrated the critical role that climate change disclosure plays in solving global sustainability challenges connected to human existence and the long-term viability of businesses. The goal of this study is to add to the existing literature on the impact of climate change-related disclosure on the financial performance of oil and gas companies in Nigeria.
Research Methodology: The study adopted an ex post facto research design, and the final sample consisted of eight oil and gas companies listed on the NGX for the year 2012-2021. The final sample consisted of a balanced panel of 80 firm-year observations. The dependent variable was Return on Assets (ROA). Data were analyzed using a multiple regression model.
Results: The findings showed a positive relationship between CCRD and ROA, which was also confirmed to be significant at the 5% significance level.
Limitations: The model includes leverage, audit quality, and firm size, in addition to CCRD, to account for their effect on ROA. Therefore, other factors that may affect firm performance are not included in the model.
Contribution: This study addresses one of the most important but less explored issues of environmental research in one of the largest economies in SSA. The data collected from the content analysis are original and provide important evidence of the impact of CCRD on firm performance. These findings encourage oil and gas companies to reduce their carbon emissions and disclose their carbon management activities.
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Afrin, S., Sehreen, F., Polas, M. R. H., & Sharin, R. (2020). Corporate Social Responsibility (CSR) practices of financial institution in Bangladesh: the case of United Commercial Bank. Journal of Sustainable Tourism and Entrepreneurship, 2(2), 69-82.
Asuquo, A. I. (2012). Environmental friendly policies and their financial effects on corporate performance of selected oil and gas companies in Niger Delta Region of Nigeria. American International Journal of Contemporary Research, 2(1), 168-173.
Bashir, M. F., Ma, B., Shahbaz, M., & Jiao, Z. (2020). The nexus between environmental tax and carbon emissions with the roles of environmental technology and financial development. PloS one, 15(11), e0242412.
Benlemlih, M., Shaukat, A., Qiu, Y., & Trojanowski, G. (2018). Environmental and social disclosures and firm risk. Journal of Business Ethics, 152, 613-626.
Burke, M., Hsiang, S. M., & Miguel, E. (2015). Global non-linear effect of temperature on economic production. Nature, 527(7577), 235-239.
c2es. (2015). Market Mechanisms: Understanding The Options. Retrieved from https://www.c2es.org/wp-content/uploads/2015/04/market-mechanisms-brief.pdf
Chang, S., Yang, X., Zheng, H., Wang, S., & Zhang, X. (2020). Air quality and health co-benefits of China's national emission trading system. Applied Energy, 261, 114226.
Cui, J., Dai, J., Wang, Z., & Zhao, X. (2022). Does environmental regulation induce green innovation? A panel study of Chinese listed firms. Technological Forecasting and Social Change, 176, 121492.
Dagar, V., Khan, M. K., Alvarado, R., Rehman, A., Irfan, M., Adekoya, O. B., & Fahad, S. (2022). Impact of renewable energy consumption, financial development and natural resources on environmental degradation in OECD countries with dynamic panel data. Environmental Science and Pollution Research, 29(12), 18202-18212.
Dell, M., Jones, B. F., & Olken, B. A. (2014). What do we learn from the weather? The new climate-economy literature. Journal of Economic Literature, 52(3), 740-798.
Delmas, M. A., Etzion, D., & Nairn-Birch, N. (2013). Triangulating environmental performance: What do corporate social responsibility ratings really capture? Academy of management perspectives, 27(3), 255-267.
Desai, R., Raval, A., Baser, N., & Desai, J. (2022). Impact of carbon emission on financial performance: empirical evidence from India. South Asian Journal of Business Studies, 11(4), 450-470.
Doh, J. P., Howton, S. D., Howton, S. W., & Siegel, D. S. (2010). Does the market respond to an endorsement of social responsibility? The role of institutions, information, and legitimacy. Journal of management, 36(6), 1461-1485.
Ekwueme, C., Egbunike, C., & Onyali, C. (2013). Benefits of triple bottom line disclosures on corporate performance: An exploratory study of corporate stakeholders. J. Mgmt. & Sustainability, 3, 79.
Fauzi, H., Svensson, G., & Rahman, A. A. (2010). “Triple bottom line” as “Sustainable corporate performance”: A proposition for the future. Sustainability, 2(5), 1345-1360.
Ganda, F. (2018). The effect of carbon performance on corporate financial performance in a growing economy. Social responsibility journal, 14(4), 895-916.
Gavrea, C., Ilies, L., & Stegerean, R. (2011). Determinants of organizational performance: The case of Romania. Management & Marketing, 6(2).
Guo, J., & Huang, R. (2021). A carbon tax or a subsidy? Policy choice when a green firm competes with a high carbon emitter. Environmental Science and Pollution Research, 1-8.
Hamidov, A., Helming, K., Bellocchi, G., Bojar, W., Dalgaard, T., Ghaley, B. B., . . . Krzeminska, D. (2018). Impacts of climate change adaptation options on soil functions: A review of European case?studies. Land degradation & development, 29(8), 2378-2389.
Hoejmose, S. U., Roehrich, J. K., & Grosvold, J. (2014). Is doing more doing better? The relationship between responsible supply chain management and corporate reputation. Industrial Marketing Management, 43(1), 77-90.
Hong, J., Zhang, Y., & Ding, M. (2018). Sustainable supply chain management practices, supply chain dynamic capabilities, and enterprise performance. Journal of cleaner production, 172, 3508-3519.
Hsiang, S. M. (2010). Temperatures and cyclones strongly associated with economic production in the Caribbean and Central America. Proceedings of the national Academy of sciences, 107(35), 15367-15372.
Ionescu, L. (2019). Climate policies, carbon pricing, and pollution tax: do carbon taxes really lead to a reduction in emissions? Geopolitics, History, and International Relations, 11(1), 92-97.
Jiang, H.-D., Liu, L.-J., & Deng, H.-M. (2022). Co-benefit comparison of carbon tax, sulfur tax and nitrogen tax: The case of China. Sustainable Production and Consumption, 29, 239-248.
Khatib, S. F., Ismail, I. H., Salameh, N., Abbas, A. F., Bazhair, A. H., & Sulimany, H. G. H. (2023). Carbon emission and firm performance: The moderating role of management environmental training. Sustainability, 15(13), 10485.
Khurshid, A., Qayyum, S., Calin, A. C., Saleem, S. F., & Nazir, N. (2022). The role of pricing strategies, clean technologies, and ecological regulation on the objectives of the UN 2030 Agenda. Environmental Science and Pollution Research, 1-14.
Kirikkaleli, D., & Oyebanji, M. O. (2022). Consumption-based carbon emissions, trade, and globalization: an empirical study of Bolivia. Environmental Science and Pollution Research, 29(20), 29927-29937.
Lee, J. (2022). Voluntary disclosure of carbon emissions information, managerial ability, and credit ratings. Sustainability, 14(12), 7504.
Liu, Q., Wang, S., Zhang, W., Li, J., & Kong, Y. (2019). Examining the effects of income inequality on CO2 emissions: Evidence from non-spatial and spatial perspectives. Applied Energy, 236, 163-171.
Lu, W., Zhu, N., & Zhang, J. (2021). The impact of carbon disclosure on financial performance under low carbon constraints. Energies, 14(14), 4126.
Ma, N., Yin, G., Li, H., Sun, W., Wang, Z., Liu, G., & Xie, D. (2022). The optimal industrial carbon tax for China under carbon intensity constraints: A dynamic input–output optimization model. Environmental Science and Pollution Research, 29(35), 53191-53211.
Mondal, M. S. A., Akter, N., & Polas, M. R. H. (2023). Factors influencing the environmental accounting disclosure practices for sustainable development: A systematic literature review. International Journal of Financial, Accounting, and Management, 5(2), 195-213.
Okafor, G. O., Okaro, S. C., & Egbunike, F. (2013). Environmental cost accounting and cost allocation (A study of selected manufacturing companies in Nigeria). European Journal of Business and Management, 5(18), 68-75.
Orajekwe, J. C., & Ogbodo, O. C. (2023). Firm-specific characteristics and environmental disclosure of energy firms in Sub-Saharan Africa. International Journal of Financial, Accounting, and Management, 5(2), 251-264.
Pankratz, N., Bauer, R., & Derwall, J. (2023). Climate change, firm performance, and investor surprises. Management science.
Ratul, S. S., Nayma, J., & Rahman, S. B. (2023). An analysis of the perceptions of CSR among Bangladeshi Business School students. International Journal of Financial, Accounting, and Management, 5(1), 35-58.
Rehman Khan, S. A., & Yu, Z. (2021). Assessing the eco-environmental performance: an PLS-SEM approach with practice-based view. International Journal of Logistics Research and Applications, 24(3), 303-321.
Saka, C., & Oshika, T. (2014). Disclosure effects, carbon emissions and corporate value. Sustainability Accounting, Management and Policy Journal, 5(1), 22-45.
Statista. (2023). Annual carbon dioxide (CO?) emissions worldwide from 1940 to 2022.
Tukur, S., Shehu, J., Mammadi, A., & Sulaiman, U. A. (2019). An assessment of corporate social responsibility of property developers in Bauchi Metropolis, Nigeria. International Journal of Financial, Accounting, and Management, 1(2), 119-129.
UNFCC. (2022). Global CO2 Emissions Rebounded to Their Highest Level in History in 2021. Retrieved from https://unfccc.int/news/global-co2-emissions-rebounded-to-their-highest-level-in-history-in-2021
Wang, M., Li, Y., Li, M., Shi, W., & Quan, S. (2019). Will carbon tax affect the strategy and performance of low-carbon technology sharing between enterprises? Journal of cleaner production, 210, 724-737.
Wang, X., Khurshid, A., Qayyum, S., & Calin, A. C. (2022). The role of green innovations, environmental policies and carbon taxes in achieving the sustainable development goals of carbon neutrality. Environmental Science and Pollution Research, 1-15.
WMO. (2021). 2020 was one of three warmest years on record. Retrieved from https://public.wmo.int/en/media/press-release/2020-was-one-of-three-warmest-years-record
Worldbank. (n.d). What is Carbon Pricing? Retrieved from https://carbonpricingdashboard.worldbank.org/what-carbon-pricing
Yang, J., Xie, H., Yu, G., & Liu, M. (2021). Antecedents and consequences of supply chain risk management capabilities: An investigation in the post-coronavirus crisis. International journal of production research, 59(5), 1573-1585.
Zhang, Y., Qi, L., Lin, X., Pan, H., & Sharp, B. (2022). Synergistic effect of carbon ETS and carbon tax under China's peak emission target: A dynamic CGE analysis. Science of the Total Environment, 825, 154076.
Zhao, Y., Wang, C., & Cai, W. (2022). Carbon pricing policy, revenue recycling schemes, and income inequality: A multi-regional dynamic CGE assessment for China. Resources, conservation and recycling, 181, 106246.
- Afrin, S., Sehreen, F., Polas, M. R. H., & Sharin, R. (2020). Corporate Social Responsibility (CSR) practices of financial institution in Bangladesh: the case of United Commercial Bank. Journal of Sustainable Tourism and Entrepreneurship, 2(2), 69-82.
- Asuquo, A. I. (2012). Environmental friendly policies and their financial effects on corporate performance of selected oil and gas companies in Niger Delta Region of Nigeria. American International Journal of Contemporary Research, 2(1), 168-173.
- Bashir, M. F., Ma, B., Shahbaz, M., & Jiao, Z. (2020). The nexus between environmental tax and carbon emissions with the roles of environmental technology and financial development. PloS one, 15(11), e0242412.
- Benlemlih, M., Shaukat, A., Qiu, Y., & Trojanowski, G. (2018). Environmental and social disclosures and firm risk. Journal of Business Ethics, 152, 613-626.
- Burke, M., Hsiang, S. M., & Miguel, E. (2015). Global non-linear effect of temperature on economic production. Nature, 527(7577), 235-239.
- c2es. (2015). Market Mechanisms: Understanding The Options. Retrieved from https://www.c2es.org/wp-content/uploads/2015/04/market-mechanisms-brief.pdf
- Chang, S., Yang, X., Zheng, H., Wang, S., & Zhang, X. (2020). Air quality and health co-benefits of China's national emission trading system. Applied Energy, 261, 114226.
- Cui, J., Dai, J., Wang, Z., & Zhao, X. (2022). Does environmental regulation induce green innovation? A panel study of Chinese listed firms. Technological Forecasting and Social Change, 176, 121492.
- Dagar, V., Khan, M. K., Alvarado, R., Rehman, A., Irfan, M., Adekoya, O. B., & Fahad, S. (2022). Impact of renewable energy consumption, financial development and natural resources on environmental degradation in OECD countries with dynamic panel data. Environmental Science and Pollution Research, 29(12), 18202-18212.
- Dell, M., Jones, B. F., & Olken, B. A. (2014). What do we learn from the weather? The new climate-economy literature. Journal of Economic Literature, 52(3), 740-798.
- Delmas, M. A., Etzion, D., & Nairn-Birch, N. (2013). Triangulating environmental performance: What do corporate social responsibility ratings really capture? Academy of management perspectives, 27(3), 255-267.
- Desai, R., Raval, A., Baser, N., & Desai, J. (2022). Impact of carbon emission on financial performance: empirical evidence from India. South Asian Journal of Business Studies, 11(4), 450-470.
- Doh, J. P., Howton, S. D., Howton, S. W., & Siegel, D. S. (2010). Does the market respond to an endorsement of social responsibility? The role of institutions, information, and legitimacy. Journal of management, 36(6), 1461-1485.
- Ekwueme, C., Egbunike, C., & Onyali, C. (2013). Benefits of triple bottom line disclosures on corporate performance: An exploratory study of corporate stakeholders. J. Mgmt. & Sustainability, 3, 79.
- Fauzi, H., Svensson, G., & Rahman, A. A. (2010). “Triple bottom line” as “Sustainable corporate performance”: A proposition for the future. Sustainability, 2(5), 1345-1360.
- Ganda, F. (2018). The effect of carbon performance on corporate financial performance in a growing economy. Social responsibility journal, 14(4), 895-916.
- Gavrea, C., Ilies, L., & Stegerean, R. (2011). Determinants of organizational performance: The case of Romania. Management & Marketing, 6(2).
- Guo, J., & Huang, R. (2021). A carbon tax or a subsidy? Policy choice when a green firm competes with a high carbon emitter. Environmental Science and Pollution Research, 1-8.
- Hamidov, A., Helming, K., Bellocchi, G., Bojar, W., Dalgaard, T., Ghaley, B. B., . . . Krzeminska, D. (2018). Impacts of climate change adaptation options on soil functions: A review of European case?studies. Land degradation & development, 29(8), 2378-2389.
- Hoejmose, S. U., Roehrich, J. K., & Grosvold, J. (2014). Is doing more doing better? The relationship between responsible supply chain management and corporate reputation. Industrial Marketing Management, 43(1), 77-90.
- Hong, J., Zhang, Y., & Ding, M. (2018). Sustainable supply chain management practices, supply chain dynamic capabilities, and enterprise performance. Journal of cleaner production, 172, 3508-3519.
- Hsiang, S. M. (2010). Temperatures and cyclones strongly associated with economic production in the Caribbean and Central America. Proceedings of the national Academy of sciences, 107(35), 15367-15372.
- Ionescu, L. (2019). Climate policies, carbon pricing, and pollution tax: do carbon taxes really lead to a reduction in emissions? Geopolitics, History, and International Relations, 11(1), 92-97.
- Jiang, H.-D., Liu, L.-J., & Deng, H.-M. (2022). Co-benefit comparison of carbon tax, sulfur tax and nitrogen tax: The case of China. Sustainable Production and Consumption, 29, 239-248.
- Khatib, S. F., Ismail, I. H., Salameh, N., Abbas, A. F., Bazhair, A. H., & Sulimany, H. G. H. (2023). Carbon emission and firm performance: The moderating role of management environmental training. Sustainability, 15(13), 10485.
- Khurshid, A., Qayyum, S., Calin, A. C., Saleem, S. F., & Nazir, N. (2022). The role of pricing strategies, clean technologies, and ecological regulation on the objectives of the UN 2030 Agenda. Environmental Science and Pollution Research, 1-14.
- Kirikkaleli, D., & Oyebanji, M. O. (2022). Consumption-based carbon emissions, trade, and globalization: an empirical study of Bolivia. Environmental Science and Pollution Research, 29(20), 29927-29937.
- Lee, J. (2022). Voluntary disclosure of carbon emissions information, managerial ability, and credit ratings. Sustainability, 14(12), 7504.
- Liu, Q., Wang, S., Zhang, W., Li, J., & Kong, Y. (2019). Examining the effects of income inequality on CO2 emissions: Evidence from non-spatial and spatial perspectives. Applied Energy, 236, 163-171.
- Lu, W., Zhu, N., & Zhang, J. (2021). The impact of carbon disclosure on financial performance under low carbon constraints. Energies, 14(14), 4126.
- Ma, N., Yin, G., Li, H., Sun, W., Wang, Z., Liu, G., & Xie, D. (2022). The optimal industrial carbon tax for China under carbon intensity constraints: A dynamic input–output optimization model. Environmental Science and Pollution Research, 29(35), 53191-53211.
- Mondal, M. S. A., Akter, N., & Polas, M. R. H. (2023). Factors influencing the environmental accounting disclosure practices for sustainable development: A systematic literature review. International Journal of Financial, Accounting, and Management, 5(2), 195-213.
- Okafor, G. O., Okaro, S. C., & Egbunike, F. (2013). Environmental cost accounting and cost allocation (A study of selected manufacturing companies in Nigeria). European Journal of Business and Management, 5(18), 68-75.
- Orajekwe, J. C., & Ogbodo, O. C. (2023). Firm-specific characteristics and environmental disclosure of energy firms in Sub-Saharan Africa. International Journal of Financial, Accounting, and Management, 5(2), 251-264.
- Pankratz, N., Bauer, R., & Derwall, J. (2023). Climate change, firm performance, and investor surprises. Management science.
- Ratul, S. S., Nayma, J., & Rahman, S. B. (2023). An analysis of the perceptions of CSR among Bangladeshi Business School students. International Journal of Financial, Accounting, and Management, 5(1), 35-58.
- Rehman Khan, S. A., & Yu, Z. (2021). Assessing the eco-environmental performance: an PLS-SEM approach with practice-based view. International Journal of Logistics Research and Applications, 24(3), 303-321.
- Saka, C., & Oshika, T. (2014). Disclosure effects, carbon emissions and corporate value. Sustainability Accounting, Management and Policy Journal, 5(1), 22-45.
- Statista. (2023). Annual carbon dioxide (CO?) emissions worldwide from 1940 to 2022.
- Tukur, S., Shehu, J., Mammadi, A., & Sulaiman, U. A. (2019). An assessment of corporate social responsibility of property developers in Bauchi Metropolis, Nigeria. International Journal of Financial, Accounting, and Management, 1(2), 119-129.
- UNFCC. (2022). Global CO2 Emissions Rebounded to Their Highest Level in History in 2021. Retrieved from https://unfccc.int/news/global-co2-emissions-rebounded-to-their-highest-level-in-history-in-2021
- Wang, M., Li, Y., Li, M., Shi, W., & Quan, S. (2019). Will carbon tax affect the strategy and performance of low-carbon technology sharing between enterprises? Journal of cleaner production, 210, 724-737.
- Wang, X., Khurshid, A., Qayyum, S., & Calin, A. C. (2022). The role of green innovations, environmental policies and carbon taxes in achieving the sustainable development goals of carbon neutrality. Environmental Science and Pollution Research, 1-15.
- WMO. (2021). 2020 was one of three warmest years on record. Retrieved from https://public.wmo.int/en/media/press-release/2020-was-one-of-three-warmest-years-record
- Worldbank. (n.d). What is Carbon Pricing? Retrieved from https://carbonpricingdashboard.worldbank.org/what-carbon-pricing
- Yang, J., Xie, H., Yu, G., & Liu, M. (2021). Antecedents and consequences of supply chain risk management capabilities: An investigation in the post-coronavirus crisis. International journal of production research, 59(5), 1573-1585.
- Zhang, Y., Qi, L., Lin, X., Pan, H., & Sharp, B. (2022). Synergistic effect of carbon ETS and carbon tax under China's peak emission target: A dynamic CGE analysis. Science of the Total Environment, 825, 154076.
- Zhao, Y., Wang, C., & Cai, W. (2022). Carbon pricing policy, revenue recycling schemes, and income inequality: A multi-regional dynamic CGE assessment for China. Resources, conservation and recycling, 181, 106246.