Deepa C. Bhat

Scholarly attention to the association between corporate governance and firm performance, considering sustainability assurance as a moderator is scarce. This study aims to examine the moderating role of sustainability assurance in the nexus between corporate governance and firm performance in India. The data relating to 35 environmentally sensitive companies among the top 100 National Stock Exchange (NSE) listed entities were gathered from the ProwessIQ Database and annual reports of companies during 2016–2022. The fixed effect regression model was employed. The results show an insignificant effect of board effectiveness on firm performance as measured by return on assets (ROA), return on equity (ROE), and Tobin’s Q. Similar findings were documented on the audit committee effectiveness and firm performance nexus, except for Tobin’s Q (β = 0.316). In addition, the study did not support the moderating role of sustainability assurance on the board effectiveness and firm performance nexus, indicating the presence of ineffective corporate governance mechanisms. However, the results show that sustainability assurance significantly and negatively moderates the relationship between audit committee effectiveness and ROA (β = –0.021), ROE (β = –0.074), and Tobin’s Q (β = –0.996). This implies that the practice of external assurance of sustainability reports by firms with audit committee effectiveness is an additional burden due to the extra cost involved. Further, the result indicates the learning curve effect among Indian companies. Thus, the findings suggest the need for regulatory focus on encouraging sustainable business practices in terms of effective corporate governance and sustainability assurance.

Acknowledgment
The authors are grateful to Manipal Academy of Higher Education (MAHE), Manipal, for providing financial assistance in the form of a “JRF Contingency Grant” for this research article.