IDEAS home Printed from https://ideas.repec.org/a/eee/finsta/v68y2023ics1572308923000657.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1572308923000657
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfs.2023.101165?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lys, Thomas & Naughton, James P. & Wang, Clare, 2015. "Signaling through corporate accountability reporting," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 56-72.
    2. Jie Cao & Hao Liang & Xintong Zhan, 2019. "Peer Effects of Corporate Social Responsibility," Management Science, INFORMS, vol. 65(12), pages 5487-5503, December.
    3. Sudheer Chava, 2014. "Environmental Externalities and Cost of Capital," Management Science, INFORMS, vol. 60(9), pages 2223-2247, September.
    4. Wei Jiang & Kai Li & Pei Shao, 2010. "When Shareholders Are Creditors: Effects of the Simultaneous Holding of Equity and Debt by Non-commercial Banking Institutions," The Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3595-3637, October.
    5. Caroline Flammer, 2015. "Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach," Management Science, INFORMS, vol. 61(11), pages 2549-2568, November.
    6. Rui Albuquerque & Yrjö Koskinen & Chendi Zhang, 2019. "Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence," Management Science, INFORMS, vol. 65(10), pages 4451-4469, October.
    7. Jha, Anand & Kulchania, Manoj & Kwon, Min-Jeong, 2022. "Stock repurchasing and corporate social responsibility," Journal of Financial Stability, Elsevier, vol. 62(C).
    8. Henri Servaes & Ane Tamayo, 2013. "The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness," Management Science, INFORMS, vol. 59(5), pages 1045-1061, May.
    9. Fama, Eugene F, 1990. "Contract Costs and Financing Decisions," The Journal of Business, University of Chicago Press, vol. 63(1), pages 71-91, January.
    10. Goss, Allen & Roberts, Gordon S., 2011. "The impact of corporate social responsibility on the cost of bank loans," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1794-1810, July.
    11. Byun, Seong K. & Oh, Jong-Min, 2018. "Local corporate social responsibility, media coverage, and shareholder value," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 68-86.
    12. Caroline Flammer & Aleksandra Kacperczyk, 2016. "The Impact of Stakeholder Orientation on Innovation: Evidence from a Natural Experiment," Management Science, INFORMS, vol. 62(7), pages 1982-2001, July.
    13. McCarthy, Scott & Oliver, Barry & Song, Sizhe, 2017. "Corporate social responsibility and CEO confidence," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 280-291.
    14. Ronald W. Masulis & Syed Walid Reza, 2015. "Agency Problems of Corporate Philanthropy," The Review of Financial Studies, Society for Financial Studies, vol. 28(2), pages 592-636.
    15. Ni, Xiaoran & Song, Wei & Yao, Jiaquan, 2020. "Stakeholder orientation and corporate payout policy: Insights from state legal shocks," Journal of Banking & Finance, Elsevier, vol. 121(C).
    16. Benlemlih, Mohammed, 2019. "Corporate social responsibility and dividend policy," Research in International Business and Finance, Elsevier, vol. 47(C), pages 114-138.
    17. Yongqiang Chu, 2018. "Shareholder-Creditor Conflict and Payout Policy: Evidence from Mergers between Lenders and Shareholders," The Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 3098-3121.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Yun & Liu, Yun & Tang, Yicheng & Gao, Qun, 2024. "Large shareholders' stock selling and corporate performance: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    2. 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.
    3. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    2. Gillan, Stuart L. & Koch, Andrew & Starks, Laura T., 2021. "Firms and social responsibility: A review of ESG and CSR research in corporate finance," Journal of Corporate Finance, Elsevier, vol. 66(C).
    3. Ayoub, Mahmoud & Qadan, Mahmoud, 2023. "Does supporting Ukraine pay well? The performance of companies that suspended their business in Russia," Research in International Business and Finance, Elsevier, vol. 66(C).
    4. Fairhurst, Douglas (DJ) & Greene, Daniel T., 2022. "Too much of a good thing? Corporate social responsibility and the takeover market," Journal of Corporate Finance, Elsevier, vol. 73(C).
    5. Gao, Feng & Li, Yubin & Wang, Xinjie & Zhong, Zhaodong (Ken), 2021. "Corporate social responsibility and the term structure of CDS spreads," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    6. Iftekhar Hasan & Panagiotis Karavitis & Pantelis Kazakis & Woon Sau Leung, 2025. "Corporate Social Responsibility and Profit Shifting," European Accounting Review, Taylor & Francis Journals, vol. 34(1), pages 1-29, January.
    7. Fan, Kwok Yuen & Shen, Jianfu & Hui, Eddie C.M. & Cheng, Louis T.W., 2024. "ESG components and equity returns: Evidence from real estate investment trusts," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    8. Li, Chengcheng & Wang, Xiaoqiong, 2022. "Local peer effects of corporate social responsibility," Journal of Corporate Finance, Elsevier, vol. 73(C).
    9. Chowdhury, Hasibul & Hodgson, Allan & Hasan, Mostafa Monzur, 2022. "Does a competitive external labour market affect corporate social responsibility? Evidence from industry tournament incentives," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    10. Nguyen, Hien T. & Phan, Hieu V. & Vo, Hong, 2023. "Agency problems and corporate social responsibility: Evidence from shareholder-creditor mergers," International Review of Financial Analysis, Elsevier, vol. 90(C).
    11. Shackleton, Mark & Yan, Jiali & Yao, Yaqiong, 2022. "What drives a firm's ES performance? Evidence from stock returns," Journal of Banking & Finance, Elsevier, vol. 136(C).
    12. Liu, Xianda & Hou, Wenxuan & Main, Brian G.M., 2022. "Anti-market sentiment and corporate social responsibility: Evidence from anti-Jewish pogroms," Journal of Corporate Finance, Elsevier, vol. 76(C).
    13. Bae, Kee-Hong & El Ghoul, Sadok & Guedhami, Omrane & Kwok, Chuck C.Y. & Zheng, Ying, 2019. "Does corporate social responsibility reduce the costs of high leverage? Evidence from capital structure and product market interactions," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 135-150.
    14. Ho, Ly & Bai, Min & Lu, Yue & Qin, Yafeng, 2021. "The effect of corporate sustainability performance on leverage adjustments," The British Accounting Review, Elsevier, vol. 53(5).
    15. Jerry Cao & Robert Faff & Jing He & Yong Li, 2022. "Who's Greenwashing Via the Media and What are the Consequences? Evidence From China," Abacus, Accounting Foundation, University of Sydney, vol. 58(4), pages 759-786, December.
    16. Yi, Yuyang & Zhang, Zongyi & Xiang, Cheng, 2022. "The value of CSR during the COVID-19 crisis: Evidence from Chinese firms," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    17. Alves, Carlos Francisco & Meneses, Lilian Lima, 2024. "ESG scores and debt costs: Exploring indebtedness, agency costs, and financial system impact," International Review of Financial Analysis, Elsevier, vol. 94(C).
    18. Lu, Hao & Osiyevskyy, Oleksiy & Liu, Xiaoyu, 2023. "Enhancer or stabilizer? Investigating the distinct impact of primary and secondary CSR on the level and variability of firm value," Journal of Business Research, Elsevier, vol. 168(C).
    19. Wang, Zhenkun & Lu, Weijie & Liu, Min, 2021. "Corporate social responsibility overinvestment in mergers and acquisitions," International Review of Financial Analysis, Elsevier, vol. 78(C).
    20. Bu, Luofan & Chan, Kam C. & Choi, Ahrum & Zhou, Gaoguang, 2021. "Talented inside directors and corporate social responsibility: A tale of two roles," Journal of Corporate Finance, Elsevier, vol. 70(C).

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finsta:v:68:y:2023:i:c:s1572308923000657. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jfstabil .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.