Corporate investment in social responsibility versus dividends?

Michel T.J. Rakotomavo

Social Responsibility Journal, 2012, vol. 8, issue 2, 199-207

Abstract: Purpose - The paper aims to examine whether corporate investment in social responsibility takes away from expected dividends. Design/methodology/approach - The article builds two hypotheses that are tested empirically through the analysis of 17,670 US firm‐year observations covering the period 1991‐2007. The tests are conducted in both univariate and multivariate settings. Findings - The evidence supports the hypothesis that mature firms tend to invest more in corporate social responsibility (CSR). Specifically, firms investing highly in CSR tend to be larger, more profitable, and with greater earned (rather than contributed) equity. The evidence also supports the hypothesis that CSR investment does not subtract from dividends. Instead, CSR effort and dividend tend to increase together. Thus, CSR investment tends to be effected by companies who can afford it, and it does not lower value by lowering investors' expected payout. Practical implications - These results imply that spending resources on CSR does not lower the cash flows paid out to investors. When combined with the finding that CSR lowers the cost of equity, they also mean that CSR increases the value of a company's stock. Originality/value - This is the first study that explicitly links CSR to the dividend flow.

Keywords: Corporate social responsibility; Investment; Dividends; Payout; Stock prices (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:srjpps:v:8:y:2012:i:2:p:199-207

DOI: 10.1108/17471111211234833

Access Statistics for this article

Social Responsibility Journal is currently edited by Prof David Crowther

More articles in Social Responsibility Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().