Corporate governance and corporate sustainability performance: the mediating role of CSR expenditure

Purpose This study investigates the effect of corporate governance (CG) characteristics on corporate sustainability performance (CSP) and whether the magnitude of CSR expenditure mediates such a relationship in the context of an emerging and developing economy-Bangladesh. Design/methodology/approach This study collects data from the annual reports of 30 private commercial banks listed with the Dhaka Stock Exchange for the period starting from 2013 to 2022, giving 300 firm-year observations. To test the hypotheses formulated, this study uses Baron and Kenny’s (1986) four-step model. Data have been analyzed using AMOS 23 to examine the direct and indirect effect of CG on sustainability performance. Findings This study finds that several CG variables (board size, board independence, sustainable finance committee) significantly affect several facets of sustainability performance (environmental, social, and financial performance). However, the mediating role of the magnitude of CSR expenditure in the relationship between CG mechanisms and sustainability performance is found to be limited. Research limitations/implications The list of CG and ownership structure variables studied is not exhaustive, and the presence of a wide variation in the measurement of sustainability performance makes its measurement subjective to some extent. Originality/value This study uses the magnitude of CSR expenditure as a mediator in the relationship between CG and sustainability performance, which is rarely addressed by the extant literature in this field.