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Clear the air via dividends: Corporates' response to air pollution

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  • Weiping Li
  • Xuezhi Zhang
  • Shuyi Cheng
  • Xiaohang Ren

Abstract

Based on China A‐share listed firms, we investigate how firms respond to air pollution using the dividend payout policy. We highlight the signaling role of dividends, documenting that firms pay higher dividends to appease and attract investors when facing more severe pollution. This effect is more pronounced when investor attention is high and less salient if shareholder governance is strong, reinforcing the signaling hypothesis and substitute model of dividend theory. Our results reject the hypothesis that air pollution decreases dividend payouts by enlarging a firm's financial constraints and cash flow uncertainty.

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  • Weiping Li & Xuezhi Zhang & Shuyi Cheng & Xiaohang Ren, 2024. "Clear the air via dividends: Corporates' response to air pollution," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3383-3396, May.
    • Handle: RePEc:bla:bstrat:v:33:y:2024:i:4:p:3383-3396
    DOI: 10.1002/bse.3646
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