Do CSR committees pay off? Direct and indirect links to financial and ESG performance

Abstract

Corporate boards increasingly delegate sustainability oversight to dedicated CSR committees, yet evidence on whether these committees improve corporate performance remains mixed. This study argues that part of this inconsistency arises because prior research often emphasizes overall associations between CSR committees and performance without distinguishing between direct links and indirect benefits that operate through stakeholder-oriented CSR strategy and reporting practices. Using an unbalanced panel of 7667 firm-year observations from 1621 listed firms across 36 countries over 2010–2021, this study tests a mediation framework in which these practices transmit the relationship between CSR committee presence and both financial and nonfinancial outcomes. Results reveal a clear tension. Controlling for the mediator, CSR committee is directly associated with lower financial performance but higher ESG performance. At the same time, CSR committee presence is strongly associated with stronger stakeholder-oriented CSR strategy and reporting practices, which are positively related to both financial and ESG outcomes, generating a positive indirect effect that exceeds the direct effect in magnitude. These inferences are corroborated using instrumental-variables estimation and a simultaneous-equations approach to mitigate endogeneity concerns. Overall, the findings suggest that CSR committees “pay off” primarily through the stakeholder-oriented practices they help institutionalize, rather than through their mere existence.