How does dividend payout affect corporate social responsibility? A channel analysis

Zeyu Sun, Xiaohui Li, Jing Xie and C.S. Cheng

Journal of Financial Stability, 2023, vol. 68, issue C

Abstract: We find that dividend paying firms demonstrate superior corporate social responsibility (CSR) performance in the subsequent year than non-paying firms. This effect can be explained by stakeholder relationship management through CSR, as dividend payout reflects the inherent conflict between shareholders and stakeholders. Specifically, for dividend payers, we find an increase in CSR performance after states adopt constituency statutes which encourage board’s attention on stakeholders, supporting a causal inference of the stakeholder relationship management’s effect on CSR. The increase in dividend payers’ CSR around the constituency statute adoption is more pronounced when management is friendlier to CSR, which lends further support for the stakeholder relationship management channel. We find no support for the short-termism view of dividends or the notion that CSR is solely an outcome of agency problems within firms. In conclusion, our findings suggest that dividend payout serves as a mechanism for balancing shareholder and stakeholder interests, leading to improved CSR performance among dividend-paying firms.

Keywords: Corporate social responsibility; Sustainable finance; Dividend payout; Stakeholder orientation (search for similar items in EconPapers)
JEL-codes: G35 G38 M14 M4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:68:y:2023:i:c:s1572308923000657

DOI: 10.1016/j.jfs.2023.101165

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