ABSTRACT
In this paper, we address an important and emerging question: Can firms’ voluntary waste disclosure affect corporate cash holdings? Using a sample of S&P 500 firms, we find strong evidence for a positive relationship between waste disclosure and the cash holding policy of firms. Furthermore, we find that waste disclosure significantly increases cash holdings only for firms with strong corporate governance quality. We also find that the significant relationship between waste disclosure and cash holdings remains unchanged only for firms that operate in environmentally sensitive industries. Our paper provides novel evidence on the role of voluntary waste disclosure as an environmental dimension that influences the cash policy of firms and highlights the little-known issue of waste disclosure as a significant research topic.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 For more details on the Plastic Disclosure Project, see www.plasticdisclosure.org/.
2 For example, prior studies on voluntary carbon disclosure, such as Stanny (Citation2013), have revealed that once a firm participates in an initiative such as the Carbon Disclosure Project voluntarily, it is more likely to participate in the future and is less inclined to report untruthfully.
3 We have rescaled both waste disclosure ratios in the regressions analyses and denoted them as waste-sale-normal and waste-asset-normal so that they lie between zero and one. Our results (untabulated) remain consistent when we employed waste-sale and waste-asset instead of waste-sale-normal and waste-asset-normal in our regression estimates.
4 The results are generated through 200 bootstrap replications. Our results remain consistent when we increased the number of replications to 500.
5 We test the validity of our instrumental variables using the Sargan-Hansen test. The test statistic (p-values) confirms that our identifications of instrumental variables are valid.