Does waste management affect firm performance? International evidence

This study examines an important yet underexplored aspect of firms' sustainability practices, i.e., waste management, in order to analyze its impact on financial performance. Although the extant literature has focused on various aspects of sustainability, the impact of waste management, which has disastrous consequences for the climate and firm performance, remains largely unexplored. Thus, using the 2002-2019 data of listed firms from 41 countries, we found a significantly negative (positive) relationship between waste generation (recycling) and financial performance. Our findings are robust to alternative variables, sub-sample analysis, and identification strategies. Moreover, a channel analysis showed that this relationship is influenced by operating costs, ESG performance-based compensation, industry nature, the Paris agreement on climate change, and the global financial crisis. Overall, the findings suggest that environmental initiatives are beneficial for firms and present important policy implications for regulators and firms.