Do foreign directors reinforce better waste management? The moderating role of eco‐innovation

Abstract

Prior studies have reported an association between corporate waste management practices and certain board attributes, but none have focused on foreign directors. Therefore, we examine foreign directors' contributions to firms' waste management by exclusively focusing on waste reduction and recycling. Furthermore, we explore an important channel through which foreign directors spur better waste management, namely, eco‐innovation. Drawing on 6891 observations affiliated with 9 sectors and 46 countries, we execute country, industry and year fixed‐effects regression analysis. We find that while foreign directors on the board are negatively associated with waste generation, they are positively associated with waste recycling. Furthermore, while the eco‐innovativeness of firms negatively moderates the association between foreign directors on the board and waste generation, it positively moderates the association between foreign directors on the board and waste recycling. Further channel analyses reveal more insights concerning polluting versus non‐polluting and poor versus strong regulatory environments.

Uncovering the role of foreign ownership in the relationship between board nationality diversity and ESG

“…Foreign owners, in particular, are more likely to enhance board performance and push managers to advance the firm's social and environmental obligations (Hussain et al, 2022) to gain the legitimacy. Previous studies support the arguments of using environmental (Mardini & Lahyani, 2021;Uyar et al, 2023) and social performance (Muttakin et al, 2015;Ntim & Soobaroyen, 2013;Setiawan et al, 2021) as tools to signal the firms' legitimacy. To ensure that firms address ESG issues to gain legitimacy, foreign investors could exert their influence through the board of directors (Schmid & Roedder, 2021).…”

“…Foreign directors bring a broad spectrum of expertise and experiences pertaining to various institutional settings (Nielsen & Nielsen, 2013), hence enhancing the decision-making quality of firms (Fuente et al, 2017;Ruigrok et al, 2007). Additionally, the presence of foreigners on the board reflects the diversity of the distinctive strategic resources, which is essential in tracing the environmental issues in the dynamic environment (Usman et al, 2020;Uyar et al, 2023). Moreover, firms with higher board nationality diversity face increased pressure from numerous stakeholders to include environmental and social issues in firms strategies (El-Bassiouny & El-Bassiouny, 2019).…”