THE EFFECT OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) FACTORS ON THE CORPORATE PERFORMANCE OF MANUFACTURING FIRMS IN NIGERIA

This study examined the influence of Environmental, Social, and Governance (ESG) factors on the financial performance of Nigerian firms in the consumer goods sector from 2014 to 2023. Using panel data analysis, the study employed both Fixed Effects (FE) and Random Effects (RE) models to estimate the relationship between ESG performance and key financial metrics, including Return on Assets (ROA), Return on Equity (ROE), and Earnings per Share (EPS). The R-squared values of 0.699, 0.531, and 0.630 for the ROA, ROE, and EPS models, respectively, indicate that the independent variables explain a significant portion of the variation in these performance indicators. The findings from the regression analysis revealed that environmental performance (ENV) positively influences both ROA and EPS, with coefficients of 0.316 (p = 0.010) and 1.428 (p = 0.045), respectively. However, social performance (SOC) showed a positive effect on ROA (β = 0.147, p = 0.034) and ROE (β = 0.511, p = 0.002), but a negative impact on EPS (β = -0.472, p = 0.005). Governance (GOV) demonstrated a positive effect on ROA (β = 0.212, p = 0.042) and ROE (β = 0.518, p = 0.041) but a significant negative effect on EPS (β = -2.307, p = 0.002). The study’s novelty lies in the integration of ESG factors with financial performance in Nigerian firms, offering valuable insights into the trade-offs between short-term costs and long-term sustainability. The results are significant for policymakers and investors, suggesting that firms should strengthen governance practices and integrate sustainable environmental and social initiatives to enhance financial performance. This study contributes to the growing body of research on the impact of ESG factors on corporate performance in Sub-Saharan Africa.