Institutional ownership and waste management: international evidence

Purpose The ethical framework of social responsibility requires individuals and businesses to ensure sustainable consumption and production patterns. Corporations responsible for a significant proportion of global waste are compelled to better manage their waste. Given that institutional ownership is a key pillar of corporate governance, we aim to investigate its impact on waste production and recycling. Design/methodology/approach We collected an international dataset of firms listed in 42 countries between 2002 and 2019, comprising 17,272 firm-year observations. We applied panel data regression techniques to investigate the impact of institutional ownership on corporate waste management while accounting for time, industry and country-fixed effects and endogeneity issues due to reverse causality (2SLS and GMM) and selection bias (PSM). Findings Our findings reveal that institutional ownership leads to reduced waste production and increased recycling. Particularly, when institutional ownership increases by one standard deviation, waste generation (recycling) decreases (rises) by 1.008 tons (0.64%). These findings are robust to alternative proxies, various econometric techniques and robustness analyses. Our cross-sectional analyses show that when institutional investors are present, there is better waste management in firms with low governance quality, low environmental orientation, firms operating in developed (i.e. G10) countries and firms having waste governance mechanisms. Taken together, our results demonstrate the socially responsible and ethical role of institutional investors toward environmental issues. Research limitations/implications The data, sourced from ASSET4 and WorldScope, primarily covers large firms, which may restrict the generalizability of our findings to small and medium-sized enterprises. Variations in governance structures and regulatory environments across countries may also influence corporate waste management practices, requiring cautious interpretation of the results in different national contexts. Additionally, due to data constraints, we were unable to distinguish between controllable and uncontrollable waste. Practical implications Our results suggest that institutional investors help reduce corporate waste and enhance recycling; therefore, the policymakers of global institutions may include institutional investors in their strategies to tackle waste and ensure sustainable production. Originality/value To the best of the authors’ knowledge, this is the first study that investigates the impact of institutional ownership on corporate waste management using an international dataset. Aligned with agency theory, our findings indicate that institutional ownership enhances corporate governance efficiency by facilitating extra monitoring and decreasing information asymmetry. Consequently, enhanced corporate governance mechanisms play a key role in better waste management.