Nonlinear effects of board size and board independence on corporate sustainability performance: international evidence

Purpose This study aims to examine the nonlinear effects of board size and board independence on the corporate sustainability performance of listed firms worldwide. Design/methodology/approach This study uses the global environmental, social and governance (ESG) dataset from the Thomson Reuters database, which includes a sample of 23,766 firm-year observations from 33 countries from 2011 to 2022. Findings The results indicate that board size and independence have positive impacts on corporate sustainability performance; however, these relationships are nonlinear. The authors find an inverted U-shaped relationship for board size. After the optimal point, the positive relationship between board size and corporate sustainability performance becomes negative. Board independence, however, has a positive exponential relationship in which the positive effect increases exponentially after the optimal point. The results are robust to a battery of tests, including alternative measures for corporate sustainability performance, board independence and different estimation procedures. Research limitations/implications This study illustrates empirical evidence on the nonlinear effect of board size and board independence on corporate sustainability performance, which explains the mixed evidence involving board size and independence in corporate sustainability literature and offers a complementary research approach in the literature on board dynamics. Practical implications This study has practical implications for investors aiming for sustainable and ethical investment choices, as they should be mindful of matters relating to board composition, particularly the appointment of independent directors and ideal board size. Originality/value Extensive empirical evidence has examined the relationship between corporate governance variables and corporate sustainability performance. This study introduces the effect of the nonlinear relationship between board size and board independence on corporate sustainability performance using international evidence.