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Does ESG Affect the Stability of Dividend Policies in Europe?

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  • Pedro Verga Matos

    (Advance/CSG, ISEG—Lisbon School of Economics & Management, Universidade de Lisboa, 1200-781 Lisboa, Portugal)

  • Victor Barros

    (Advance/CSG, ISEG—Lisbon School of Economics & Management, Universidade de Lisboa, 1200-781 Lisboa, Portugal)

  • Joaquim Miranda Sarmento

    (Advance/CSG, ISEG—Lisbon School of Economics & Management, Universidade de Lisboa, 1200-781 Lisboa, Portugal)

Abstract

Sustainability has become a significant issue for firms and investors throughout the world, although it cannot be attained if policies impact the stability of firms’ dividend policies. In this paper, we use data from the Stoxx Euro 600 firms from 2000 to 2019 and the ESG (environmental, social and governance) scores from Thomson Reuters to assess the relationship between ESG responsibility performances and the firm’s dividend policy. The results indicate that more sustainable firms exhibit a more stable dividend payout. This result is also valid when the ESG pillars are analysed, specifically, the environmental and governance pillars. The findings further suggest that higher ESG scores reveal better long-term alignment with shareholders and other stakeholders due to more proportionally stable profit sharing.

Suggested Citation

  • Pedro Verga Matos & Victor Barros & Joaquim Miranda Sarmento, 2020. "Does ESG Affect the Stability of Dividend Policies in Europe?," Sustainability, MDPI, vol. 12(21), pages 1-15, October.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:21:p:8804-:d:433529
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    2. Khan, Muhammad Arif, 2022. "ESG disclosure and Firm performance: A bibliometric and meta analysis," Research in International Business and Finance, Elsevier, vol. 61(C).
    3. Tiago Gonçalves & Diego Pimentel & Cristina Gaio, 2021. "Risk and Performance of European Green and Conventional Funds," Sustainability, MDPI, vol. 13(8), pages 1-17, April.
    4. Tiago Cruz Gonçalves & Diogo Louro & Victor Barros, 2023. "Can Corporate Sustainability Drive Economic Value Added? Evidence from Larger European Firms," JRFM, MDPI, vol. 16(4), pages 1-20, March.
    5. So Ra Park & Jae Young Jang, 2021. "The Impact of ESG Management on Investment Decision: Institutional Investors’ Perceptions of Country-Specific ESG Criteria," IJFS, MDPI, vol. 9(3), pages 1-27, September.
    6. Seo, Sung Won & Lee, Jong Hwa, 2023. "Peer effect on dividends and return comovement," The North American Journal of Economics and Finance, Elsevier, vol. 67(C).
    7. Mazzarano, Matteo & Guastella, Gianni & Pareglio, Stefano & Xepapadeas, Anastasios, 2021. "Carbon Boards and Transition Risk: Explicit and Implicit exposure implications for Total Stock Returns and Dividend Payouts," FEEM Working Papers 316261, Fondazione Eni Enrico Mattei (FEEM).
    8. Samuel Buertey & Richard Ramsawak & Raymond K. Dziwornu & Yong‐Seok Lee, 2024. "Corporate social responsibility and dividend payout policy in extraordinary time: Empirical study of South Africa," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 514-527, January.
    9. Barros, Victor & Falcão, Pedro Fontes & Sarmento, Joaquim Miranda, 2022. "Are more sustainable firms able to operate with lower working capital requirements?," Finance Research Letters, Elsevier, vol. 46(PB).
    10. Bilyay-Erdogan, Seda & Danisman, Gamze Ozturk & Demir, Ender, 2023. "ESG performance and dividend payout: A channel analysis," Finance Research Letters, Elsevier, vol. 55(PA).
    11. Saeed, Abubakr, 2021. "The impact of employee friendly practices on dividend payments: Evidence from emerging economies," Journal of Business Research, Elsevier, vol. 135(C), pages 592-605.
    12. Mathew Kevin Bosi & Nelson Lajuni & Avnner Chardles Wellfren & Thien Sang Lim, 2022. "Sustainability Reporting through Environmental, Social, and Governance: A Bibliometric Review," Sustainability, MDPI, vol. 14(19), pages 1-22, September.
    13. Michał Comporek & Magdalena Kowalska & Anna Misztal, 2021. "The sustainable development of transport enterprises in the context of macroeconomic conditions. The case of Central and Eastern European countries," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(3), pages 226-247, March.
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