The impact of capital expenditure on ESG performance: the moderating role of CEO board membership in Saudi listed firms

Purpose This paper aims to examine the relationship between capital expenditure (CAPEX) and environmental, social and governance (ESG) performance, along with how CEO board membership moderates this relationship, based on a sample of Saudi listed firms. Design/methodology/approach The initial sample comprised all the firms listed on the Saudi Stock Exchange from 2014 to 2023. The authors use ordinary least squares (OLS) regression model to assess whether CAPEX leads to an increase in ESG. Findings This study finds that CAPEX is positively and significantly related to ESG performance. The observations also reveal that CEO board membership moderates the impact of CAPEX on ESG, whereby the effect of CAPEX on ESG performance diminishes when the CEO plays the dual role of an executive and a board director. This moderating effect suggests that potential conflicts of interest or governance inefficiencies may reduce the effectiveness of CAPEX investments in driving improvements in ESG. Originality/value This paper contributes to the growing body of knowledge on corporate governance and sustainability by highlighting the role of governance structures – specifically, CEO board membership – in shaping the outcomes of capital investments directed towards the promotion of sustainability.