Does Sustainability Transparency Moderate the Relationship between Audit Committee Characteristics and Firm Performance? Evidence from Sub Sahara Africa

Abstract

This study looks at how sustainability transparency affects the relationship among firm performance and audit committee features in Sub-Saharan Africa. The study, which is based on agency and stakeholder theories, examines whether ESG openness improves the efficacy of an audit committee as represented by its size, independence, financial knowledge, and frequency of meetings in promoting company success. We use OLS and random-effects ML regression models on a manually gathered panel dataset of 100 listed non-financial companies from 10 sub-Saharan African nations between 2016 and 2023. The efficacy of audit committees greatly enhances corporate performance, according to the findings. Market-based performance is positively impacted by sustainability transparency, although accounting-based metrics yield inconsistent findings. Crucially, sustainability transparency modifies the governance-performance relationship in a complex way: it increases the relationship when audit committees are independent and financially knowledgeable, but it decreases it when committees are highly active or assessed using a composite index. These results demonstrate that sustainability transparency does not always improve governance effectiveness; rather, its impact depends on certain institutional settings and governance traits. By including sustainability transparency into the governance-performance link in an understudied emerging market scenario, this study advances corporate governance efforts and provides useful information for regulators, boards, and investors in sub-Saharan Africa.
Keywords: Audit Committee Effectiveness; Corporate Sustainability Transparency; Firm Financial Performance; Sub-Saharan Africa; Corporate Governance.