CFO Demographics and Corporate Sustainability: The Mediating Role of Investment Efficiency

Abstract

This study investigates the influence of Chief Financial Officer (CFO) demographic characteristics — specifically age and organizational tenure — on corporate sustainable development, as proxied by a composite environmental, social, and governance (ESG) performance score, through the mediating channel of investment efficiency. Drawing on Upper Echelons Theory and Agency Theory, we argue that cognitively experienced and institutionally embedded CFOs make more strategically aligned investment decisions, which in turn enhance firm-level sustainability performance. Using a balanced panel of 430 firms observed over 12 years (N = 5,160 firm-year observations), we employ panel fixed effects (FE) estimation with clustered standard errors as the primary estimator, complemented by Pooled Mean Group (PMG) estimation to account for the mixed I(0)/I(1) integration orders confirmed by second-generation Cross-sectionally Augmented IPS (CIPS) unit root tests. Bootstrapped mediation analysis (5,000 resamples) confirms that investment efficiency partially mediates both CFO age (indirect ? = 0.0021, 95% CI [0.001, 0.005]) and CFO tenure (indirect ? = 0.0024, 95% CI [0.001, 0.006]) pathways to sustainable development. Long-run PMG estimates corroborate the direction and significance of these effects, with an error correction term of ?0.3847 confirming equilibrium adjustment at a speed of approximately 38.5% per period. All seven hypotheses are supported. Findings survive a comprehensive battery of robustness tests including System GMM, two-stage least squares instrumental variables, two-way fixed effects, and alternative dependent variable operationalization. The study contributes novel empirical evidence linking CFO human capital to sustainable development through an investment efficiency channel and carries implications for board-level succession planning and regulatory disclosure policy.