Moderating Effect of Board Characteristics on the Relationship Between Renewable Energy Investment and Firm Performance among Oil & Gas Firms in Sub Saharan Africa

Abstract

Several factors affect the firm performance of oil and gas firms due to their potential relevance to a company's profitability and sustainability. Renewable energy investment includes the factors that represent an enormous challenge to the oil and gas firm's survival. This study examines the moderating effect of board characteristics on the relationship between renewable energy investment and firm financial performance among oil and gas firms in sub-Saharan Africa. The sample population of fifty (50) oil and gas firms was selected using the purposive sampling method. Data were collected from secondary sources comprising an audited annual financial statement of sampled firms and the LSEG data stream. The period of the study was ten (10) years (2014–2023). Data were analysed using a linear multiple regression technique in the STATA software package. The result of the study reveals a significant negative effect of renewable energy investment on Return on Assets (ROA) and a significant positive effect on Net Profit Margin (NPM). Similarly, board independence and board tenure have an insignificant moderating effect on the relationship between renewable energy investment, ROA and NPM. While board expertise has a positive moderating effect on the relationship between renewable energy investment and NPM. Gender diversity has a positive moderating effect on the relationship between renewable energy investment and ROA of oil and firms of sub-Saharan Africa. The study concludes that while renewable energy investments temporarily decrease return on assets, it has a long-term profitability benefit, create value for investors’ confidence and firms’ sustainability among the oil and gas firms, especially when complemented by an effective corporate governance mechanism. Therefore, this study suggests for effective corporate governance compliance, specifically boards with expert members and more female directors are in better positioned to guide, evaluate and contribute to good oversight and innovative investment decisions in renewable energy, also a collaboration of oil and gas firms with governments, development banks and private investors to provide incentives in terms of concessional funds, subsidies and tax reliefs to encouraged the firms to invest more on renewable energy projects beyond the current average investment level to strengthen long-term competitiveness and resilience against oil price volatility and improved firm performance.