Board network centrality and financial performance: the mediating role of sustainability performance

Abstract

Purpose – This study empirically investigates whether sustainability performance acts as a mediating mechanism linking board network centrality to financial outcomes. Design/methodology/approach – Drawing on a sample of 888 publicly listed European firms, we construct a network based on board interlocks and compute five centrality measures: degree, closeness, betweenness, eigenvector, and N-score (a composite measure capturing overall centrality). We employ structural equation modeling to investigate the mediating role of sustainability performance, measured through firm-level ESG indicators. Findings – Our results indicate that board network centrality has a positive indirect effect on financial performance through improved sustainability performance, even in the absence of a direct link. By identifying sustainability performance as a mediating channel, this study theorizes how firms can leverage the social capital embedded in board networks to achieve tangible performance benefits. Originality/value – In today’s interconnected global landscape, firms derive strategic advantages not only from internal capabilities but also from their embeddedness in external networks. Among these, board networks, formed through board interlocks, constitute a key source of social capital, providing networked firms with access to valuable resources and enhanced legitimacy based on their network position. However, empirical evidence on the relationship between board network centrality and firm performance remains inconclusive, underscoring the need to explore potential mediating mechanisms.