Audit Committee Characteristics and Sustainability Performance: The Mediating Role of Sustainability Reporting Quality

ABSTRACT This study examines the impact of audit committee characteristics, specifically independence and expertise, on sustainability performance. It also explores the mediating role of sustainability reporting quality in the relationship between audit committee characteristics and sustainability performance. The study analyzes a sample of 8336 firm‐year observations across 18 European countries and 10 economic sectors from 2012 to 2022. The results reveal that audit committee independence and expertise are positively associated with sustainability performance. Furthermore, the quality of sustainability reporting mediates this relationship, explaining how audit committee characteristics enhance sustainability performance. Empirical evidence regarding the relationship between audit committees and sustainability performance within European countries is limited. Prior research mainly focuses on the direct effects of audit committees on sustainability performance. To the best of the authors' knowledge, this is the first study that provides useful evidence regarding the mediating impact of sustainability reporting quality on the relationship between audit committee characteristics and sustainability performance, offering novel insights into this underexplored area. The findings offer important implications for managers focused on identifying the drivers and enablers for improving sustainability performance. They also contribute to the ongoing regulatory debate by highlighting that a deeper understanding of audit committees' composition and expertise would make European companies more sustainable and more focused on enhancing the quality of sustainability reporting.