Investigating the Role of Corporate Governance Moderation in the Relationship between Corporate Sustainability Performance and Financial Performance

Document Type : Research Paper

Authors

1 Instructor Department of Accounting, Payame Noor University (PNU), Tehran, Iran

2 Associate Professor Department of Accounting, Semnan Branch, Islamic Azad University, Semnan, Iran.

3 Assistant Professor Department of Accounting, Sari Branch, Islamic Azad University, Sari, Iran.

Abstract

This study’s aim is to study the effect of some corporate governance mechanisms (board structure) on corporate sustainability performance (CSP), and also impact of CSP on Corporate Financial Performance (CFP) and moderation effect of corporate governance on the relationship between CSP and CFP. In this study, 93 companies listed in the Tehran Stock Exchange (TSE) is investigated during 2008-2018. Five dimensions of economic, social, governance, environmental and ethics of KLD Index has been used to measure the sustainability performance. Testing the research hypotheses is done by ordinary least squares regression (OLS) and robust OLS regression. The results of the hypothesis test showed that the level of corporate governance calculated with the above indicators has a significant positive relationship with CSP. Results also showed that a higher corporate governance level could increase the impact of CSP on ROA and the Tobin’s Q ratio. Generally, higher corporate governance levels increase CSP, which exacerbates the positive effect of CSP on CFP. This causes a firm lead effectively to ethics and social responsibility and environmental requirements and it can be sustainable in creating long-term financial performance.

Keywords

References

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History

  • Receive Date: 25 August 2019
  • Revise Date: 09 March 2021
  • Accept Date: 01 January 2020

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