Determinants of corporate natural resource efficiency: the role of corporate governance and firm characteristics in an emerging economy

Abstract

This study aims to investigate the firm-level determinants of natural resource efficiency (NRE) in non-financial firms, offering novel insights grounded in the Natural Resource-Based View (NRBV) and stakeholder theory. Using 2,489 firm-year observations from 206 DSE-listed companies over the period 2001–2021, this study uses Ordinary Least Square, Feasible Generalized Least Squares and system Generalized Method of Moments estimations to address issues of unobserved heterogeneity and potential endogeneity. The analysis reveals that firm-specific factors such as size, operational efficiency, liquidity and leverage significantly influence NRE. Larger and more efficient firms tend to manage natural resources more effectively, while high leverage and older firm age are linked to reduced efficiency, suggesting that financial pressure and institutional inertia may hinder sustainable practices. Governance attributes exhibit mixed effects: board meeting frequency is positively associated with NRE, indicating the importance of active oversight, whereas board size and diversity show negative associations, suggesting potential coordination challenges. Subsample analyses across firm sizes and industries highlight substantial heterogeneity in these relationships, indicating that resource efficiency strategies must be tailored to organizational and sectoral contexts. The findings of this study offer practical implications for regulators, policymakers and firms aiming to enhance sustainability through targeted interventions that prioritize operational efficiency, financial resilience and board-level diversity to improve NRE. This study contributes to the literature by introducing a quantifiable firm-level measure of NRE, conducting robust cross-sectional analyses and emphasizing the strategic role of governance in enhancing environmental performance.