Corporate social responsibility and corporate payout policy: the impact of product market competition

Purpose - The purpose of this paper is to empirically investigate if and how firm performance in corporate social responsibility (CSR) is related to corporate payouts and how competition in product markets influences this relation. Design/methodology/approach - Logit and Tobit regressions are used to estimate the relation between firm performance in CSR and corporate payouts. Findings - The empirical results show that firm performance in CSR is positively related to the propensity and level of dividends, repurchases and total payouts (dividends plus repurchases). However, the positive relation between CSR performance and corporate payouts is significant only for firms that operate in low competition markets. In high competition markets, CSR performance does not seem to have any significant relation with corporate payouts. Research limitations/implications - This study uses MSCI social ratings data to measure net scores on CSR. There is no systematic conceptual reason for measuring social performance using MSCI social ratings. Future research should use other measures of social performance (e.g. Dow Jones Sustainability Index, Accountability Ratings and Global Reporting Initiative to estimate the relation between CSR and corporate payouts). Practical implications - CSR firms are more likely to choose higher payouts when they operate in low competition markets. Originality/value - This study contributes to the stream of research that evaluates the payout choices of CSR firms and competition in product markets. To the author's knowledge, this is the first study that documents the impact of market competition on the relation between firm performance in CSR and corporate payouts.