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

Author

Listed:
  • Sun, Zeyu
  • Li, Xiaohui
  • Xie, Jing
  • Cheng, C.S.
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.

Suggested Citation

  • Sun, Zeyu & Li, Xiaohui & Xie, Jing & Cheng, C.S., 2023. "How does dividend payout affect corporate social responsibility? A channel analysis," Journal of Financial Stability, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:finsta:v:68:y:2023:i:c:s1572308923000657
    DOI: 10.1016/j.jfs.2023.101165
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    Cited by:

    1. Chuanzhen Li & Liang Zhao & Yiwen Zhang, 2024. "Economic policy uncertainty and cash dividend policy: evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    2. Wu, Xiang & Zhang, Bing, 2024. "Retail investors’ escaping from the bottom and clustering at the top of the trend in China," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 875-904.

    More about this item

    Keywords

    Corporate social responsibility; Sustainable finance; Dividend payout; Stakeholder orientation;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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