Corporate Sustainability and Firm Performance: The Moderating Role of CEO Education and Tenure

Abstract

The aim of this research is to investigate the impact of corporate sustainability on a firm’s financial performance. It particularly investigates the effectiveness of CEO characteristics as a moderator on corporate social responsibility (CSR)–firm financial performance linkages. This study is unique since it sheds new insight on how a CEO’s attributes may influence the relationship between CSR and financial performance. The evidence so far is sparse, since previous studies have investigated the direct effects of CEO or CSR on corporate performance. We look at a sample of 34 Saudi publicly traded companies from 2015 to 2020. Data on financial, accounting, and sustainability variables are collected from the Bloomberg database and the annual reports of the selected companies. Findings reveal that firms engaged in corporate social responsibility practices tend to have better financial performance. More importantly, it is found that in the moderation relationship of firm financial performance with corporate sustainability, CEO education and tenure act as positive moderators. In particular, results indicate that CEOs having an engineering- or a science-related degree positively affect the relationship between CSR and business performance. The relationship is further enhanced when the CEO holds an MBA. Finally, longer tenured CEOs play a positively moderating role in the association between firm performance and CSR.