Are Dividends Detrimental to Corporate Social Performance?

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We offer some new original insights on the ongoing debate about financial implications of CSR activities by investigating the relationship between dividend policy and corporate social performance. Based upon the stakeholder theory, we postulate that satisfying shareholders’ claims
may lead to serve the interests of other stakeholders through corporate social policies. On the other hand, when dividends paid are too high, one may presume that the company does not have enough financial slack to satisfy the other stakeholders any more, implying that dividends are paid at the expense of corporate social policies. We then expect a U-inverted relationship between dividend policy and corporate social performance. Using a worldwide sample of almost 7,000 observations, we find support for this U-inverted relationship. This result proves to be robust to both social and environmental pillars, different measures of dividends as well as ESG scores.

Author(s):

Mohamed Arouri    
Université Clermont Auvergne
France

Sylvain Marsat    
Université Clermont Auvergne
France

Guillaume Pijourlet    
Université Clermont Auvergne
France