THE ROLE OF AUDIT COMMITTEE'S CONTRIBUTION TO SOCIAL RESPONSIBILITY DISCLOSURE: THE SUSTAINABILITY COMMITTEE AS A MODERATOR VARIABLE

Abstract

This paper examines the impact of the characteristics of the audit committee on the degree of corporate social responsibility (CSR) disclosure in the firms listed on the STOXX Europe 600 Index. The paper analyses the impact of a set of characteristics of the audit committee (size, meetings, independence, and expertise) on the quality of CSR reporting. Drawing from agency, stakeholder, and legitimacy theories, the research investigates the application of governance mechanisms to reduce information asymmetry and promote responsible disclosure. An instrumental contribution of this study is the consideration of the sustainability committee as a moderating variable, which allows for further understanding of the interplay between governance mechanisms and CSR disclosure. The potential mediating impact of the Sustainability Committee will be examined to assess whether it enhances the role of the Audit Committee's characteristics and its ability to ensure compliance with sustainability reporting standards. Employing panel data of European companies, the study applies regression techniques to provide evidence for the impact of internal governance mechanisms on the level of CSR disclosure. Results reveal that the determinants of characteristics of the audit committee have a notable influence on social responsibility disclosure, and the sustainability committee positively reinforces such a nexus. This article advances the burgeoning literature on governance and sustainability by developing a more holistic model and delivering pragmatic suggestions on enhancing the quality of CSR reporting to meet international requirements and expectations of stakeholders.