The relationship between dividend payout and corporate social responsibility: The moderating effect of shareholder friendliness and board monitoring

The purpose of this study is to extend the previous literature on the dividend payout and corporate social responsibility nexus by considering internal and external contingencies. We specifically examine the relationship between dividend payout and corporate social responsibility and whether shareholder friendliness and board monitoring moderate this relationship. Based on a sample of 34,456 observations across 60 countries from 2003 to 2019, we find that dividend payout is positively associated with nine dimensions of environmental, social, and governance pillars, whereas dividend growth is negatively associated with them. Furthermore, we find that shareholder friendliness negatively moderates the relationship between dividend payout and some environmental, social, and governance dimensions, whereas board monitoring has a positive moderating effect. These results suggest that shareholder-oriented managers prioritize shareholders' interests at the expense of stakeholders. However, the board plays a good monitoring role in resolving conflicts of interest between shareholders and stakeholders. Additional tests show that there is an inverted U-shaped relationship between dividend payout and corporate social responsibility, suggesting that firms might find it difficult to balance the interests of both parties at high dividend payout. Finally, under weaker market regulations, the direct relationship between dividend payout and corporate social responsibility and the moderating effects are positive and stronger.