Impact of ESG practices and financial performance of some selected quoted manufacturing firms in Nigeria

Abstract

This study investigates the impact of environmental, social, and governance (ESG) practices on the financial performance of quoted manufacturing firms in Nigeria, focusing on earnings per share (EPS), return on assets (ROA), and return on equity (ROE). Utilizing data from 10 firm for a period of 9-year (2015-2023) observations, regression analyses were employed to assess the relationships between ESG dimensions and financial performance. The results reveal a significant positive influence of environmental practices on EPS and ROA, underscoring the financial benefits of adopting sustainable environmental initiatives. Social practices demonstrated a strong positive association with EPS and ROA, highlighting the importance of social responsibility in fostering stakeholder trust and enhancing performance. However, their effect on ROE was marginal, suggesting room for improvement in leveraging social initiatives for equity returns. Governance mechanisms significantly affected EPS and ROA positively, demonstrating the role of transparency and accountability in driving profitability. Nevertheless, governance exhibited a negative association with ROE, suggesting a potential imbalance in cost and return distribution among equity holders. The findings suggest that integrating ESG practices can boost financial performance, particularly through improved EPS and ROA, but emphasize the need for a strategic approach to governance mechanisms to optimize equity returns. The study recommends strengthening sector-specific ESG frameworks, promoting sustainable practices across industries, and implementing policies to align governance strategies with equity performance. These insights contribute to the growing body of knowledge on ESG's role in enhancing corporate performance in emerging economies.