ESG Performance and Dividend Payout: The Moderating Role of ESG Controversies and Legal Systems

Satish Kumar and Avinash Ghalke

Business Strategy and the Environment, 2025, vol. 34, issue 6, 7210-7227

Abstract: This study delves into the relationship between ESG performance and dividend payout in G20 countries. Based on a comprehensive sample of 2344 firms from 2011 to 2022, our findings reveal a positive correlation between ESG performance and dividend payout. Notably, this positive impact is significantly pronounced in common‐law countries, where investor protection is robust. Moreover, companies with high ESG performance are more adept at increasing dividends despite ESG controversies. These results remain robust even when considering endogeneity concerns, reduced sample size, or the use of alternative proxies for dividends and ESG. Our study's findings have practical implications, as they suggest that companies can enhance their dividend payout by improving their ESG performance, even in the face of controversies. This contributes to the existing literature by shedding light on the relationship between non‐financial performance and a key corporate financial decision (dividends) in a cross‐country context.

Date: 2025
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