Payout policy and ESG: A European investigation

This paper investigates the relationship between Environmental, Social, and Governance (ESG) practices and firms’ payout policy (PP). The sample analyzed 3207 European firms from 2018 to 2022. The investigation reveals a positive and significant effect of ESG practices on firm’s PP, suggesting that...

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Bibliographic Details
Published in:Research in international business and finance 2024-01, Vol.68, p.102189, Article 102189
Main Authors: Salvi, Antonio, Nirino, Niccolò, Battisti, Enrico, Gianfrancesco, Igor
Format: Article
Language:English
Subjects:
Dividend policy
ESG
Payout Policy
Sustainability
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Summary:This paper investigates the relationship between Environmental, Social, and Governance (ESG) practices and firms’ payout policy (PP). The sample analyzed 3207 European firms from 2018 to 2022. The investigation reveals a positive and significant effect of ESG practices on firm’s PP, suggesting that companies prioritizing sustainability distribute higher dividends to shareholders. The results remain robust across different model specifications. This study offers valuable contributions to both theoretical and practical domains, enhancing the understanding of how sustainable concerns influence companies’ strategic decisions and highlighting the possible trade-off that managers face between investing in sustainability initiatives and distributing dividends. [Display omitted] •Positive impact of ESG practices on dividend payout policy, suggesting that companies prioritizing sustainability pay more dividends to shareholders.•Strategic choices and trade-off between investing in sustainability initiatives and paying dividends.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2023.102189