EFFECT OF CORPORATE ENVIRONMENTAL INVESTMENT ON THE FINANCIAL PERFORMANCE OF OIL AND GAS COMPANIES LISTED IN NIGERIA (2009-2018)

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

Corporate environmental investments have traditionally been deemed to be an unnecessary cost to companies, with investors against their undertaking because of perceived no or insignificant returns. Hitherto, investment in corporate social responsibility (CSR) as a global phenomenon has remained a thriving corporate governance concept and management strategy in most multinationals (Peng & Yang, 2014; Amin-Chaudhry, 2016). It keeps attracting the interest of a vast number of scholars, economists, governmental and non-governmental organizations, and the public as a result of industrial growth and economic prosperity of many nations globally (Abiodun, 2012; Adeyemi & Ayanlola, 2014; Harpreet, 2009; Uadiale &Fagbemi, 2012; Uwuigbe & Uadiale, 2016). Documented evidence has shown that investments in corporate social responsibility have the potentials of making positive contributions to the development of society and businesses (Harpreet, 2009; Helg, 2015; Wahba & Elsayed, 2015; Hategan &Curea-Pitorac, 2017). However, recent research and literature highlight financial benefits accruing from environmental investments. In recent years, there has been a growing demand for companies to improve their sustainability practices, environmental and good corporate citizenship initiatives (Brown, Malmqvist & Wintzell, 2016). According to Streimikiene, Navikaite and Varanavicius (2016), mounting pressure from stakeholder groups has led top executives of many companies to implement corporate environmental investments (Streimikiene et al., 2016). Implementing environmental-related investments enable businesses to give back to both the environment and community in which they operate (Depoers, Jeanjean & Jérôme, 2016). Presently, environmental matters have received a much higher priority in business decisions with management having to incorporate environmental variables in business operations. In support of this view, Brown et al. (2016) reveal that companies in the United States of America (USA) spent more than $120 billion to comply with environmental laws and regulation in addition to several billion spent on research and development. Additionally, Strezov and Evans (2016) state that the top 10 American firms are now spending over 5 billion annually on research and development. In expending huge amounts on compliance with environmental laws and regulation, companies can voluntarily reduce their pollution levels beyond compliance (Brown et al., 2016)