Dividend payout: Unveiling the power of Environmental, Social, and Governance (ESG) investments

Abstract

This paper explores the link between Environmental, Social, and Governance (ESG) factors and dividend policy across various regions and economic contexts. Using an international sample from developed and emerging markets for 2015 - 2021, we utilize a panel data estimation methodology with multi-way fixed effects, including time, industry, and country. We also employ Difference-in-Differences (DID) and Propensity Score Matching (PSM) methodologies. Our study finds a positive link between ESG and dividend payout ratios for firms in both developed and emerging markets, indicating the global influence of ESG. This suggests that firms investing more in ESG activities tend to pay higher dividends to shareholders. Even during the Covid-19 pandemic, our research confirms that the positive association between ESG and dividend payout ratios persists. However, it is somewhat weaker than before, highlighting the continued relevance of ESG during times of crisis. Robustness checks provide strong support for these findings.