Dividend payouts; Agency conflicts; ESG reporting; International sample
Abstract :
[en] Governments and stock exchanges worldwide are increasingly mandating firms to disclose their environmental, social, and governance (ESG) performance. This study examines whether firms adjust their dividend policies following the implementation of mandated ESG reporting. Leveraging the staggered adoption of mandatory ESG reporting using a large international dataset spanning from 1996 to 2019, we find a substantial and negative impact on corporate dividends. Specifically, we observe that firms subject to mandatory ESG reporting, on average, reduce their dividend payout ratios by approximately 25% immediately after its implementation. Further analysis reveals that this response is more pronounced for firms facing higher agency conflicts and operating in environments with greater information asymmetry, as these firms are more difficult to monitor. Additionally, we find that the impact is stronger for firms located in countries with less developed stock markets and higher financial constraints. Exploiting cross-country variations in the regulatory framework of ESG reporting, we find a heightened response in jurisdictions with stricter disclosure requirements.
Disciplines :
Finance
Author, co-author :
Chen, Xiaoqi; Xiamen University, China
Li, Weiping; University of Macau, Macao
Torsin, Wouter ; Université de Liège - ULiège > HEC Liège Research > HEC Liège Research: Financial Management for the Future
Tsang, Albert; Southern University of Science and Technology, China
Language :
English
Title :
Dividend policy under mandatory ESG reporting
Publication date :
18 April 2024
Journal title :
Journal of International Financial Markets, Institutions and Money
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