Striving to safeguard shareholders or maintain sustainability in periods of high uncertainty: A multi-country evidence
Résumé
The significance of economic policies and their impact on corporate behavior and ecosystems are increasing in today's interconnected world. The purpose of this study is to assess the impact of economic policy uncertainty (EPU) on waste generation by firms and the impact of gender diversity on corporate boards on the relationship between EPU and waste generation. The study contributes to existing research related to ecological economics by investigating the impact of EPU on the level of waste generated by firms in China, Europe, and the US. Using a dataset of 8007 firm-year observations from 2002 to 2019, we find overwhelming evidence that EPU increases the level of waste produced, both hazardous and non-hazardous. This finding supports the “shareholders' wealth maximization” theory, which states that firms strive to safeguard shareholders during periods of high uncertainty. However, women directors, being more sensitive to sustainability, perform well on this front even during periods of high uncertainty, as the results show that gender-diverse boards significantly moderate the adverse impact of policy uncertainty on waste generation. However, the moderating impact of gender diversity is significant only for firms operating in environmentally sensitive industries. Our results are robust to different regression models, proxies for waste, and endogeneity issues.