The association between corporate social responsibility and dividend pay-outs
by Charl De Villiers; Diandian Ma
International Journal of Critical Accounting (IJCA), Vol. 9, No. 5/6, 2017

Abstract: We examine the association between corporate social responsibility (CSR) and dividend pay-outs for US firms. In theory, high dividend pay-outs could limit managers' ability to invest in CSR. Managers' decision to invest in CSR could be driven by a desire to attain a competitive advantage for the firm or by a desire for personal kudos. If an investment in CSR leads to a competitive advantage with the economic benefits that entail, then high dividend pay-outs and investments in CSR will not be mutually exclusive. We find that high dividend pay-outs are associated with better CSR performance. Therefore, we conclude that investments in CSR are mostly driven by managers' desire to seek a competitive advantage and that this strategy is mostly successful. We contribute to a better understanding of the causal relationships at work, including providing evidence that suggest that investments in CSR are generally not driven by personal agenda, but that apart from being (per definition) good for society, CSR is also good for firms. These findings and their implications will be of interest to investors and analysts, because the findings show that better CSR performance should be seen as a positive signal.

Online publication date: Thu, 22-Mar-2018

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