Scoping the Mediating Role of Corporate Governance on the Relationship Between Sustainability and Financial Performance of Firms

Abstract

Corporate sustainability is becoming pervasive, resulting in the intertwining of governance mechanisms at the organizational level, which is ultimately responsible for sustainability and the financial performance of firms. The objective of this study is to systematically document the extent to which various corporate governance mechanisms mediate the relationship between sustainability and the financial performance of firms. Following a scoping review approach, this paper analyzes a final sample of 91 studies for the period 2016–2022. Drawing from the cluster analysis technique, this paper identifies three focus areas: 1) board-level governance, 2) operational-level governance, and 3) assurance-level governance. The results suggest that these governance mechanisms have become increasingly significant for firm performance. In addition to consolidating the existing knowledge and frameworks in which governance and sustainability research intersect, the findings yield policy implications for firms seeking to integrate sustainability into their operations. This study contributes to the literature by being the first of its kind to systematically document the mediating role of governance on the relationship between sustainability and the financial performance of firms. It concludes that though existing literature provides a good overview of emerging governance strategies in relation to firm performance, there is a need for more deductive evidence in the literature.