Esg and dividends: The winning combination for savvy stock investors

Abstract

Environmental, Social, and Governance (ESG) is a new spotlight for investors to seize the opportunity to make intelligent decisions and for corporations to easily follow the trend of the world. But does ESG really have long-term value, or is it just a transient phenomenon? Our study aims at testing the relationship between ESG standards and the dividend payout policy of corporations, demonstrating the importance of ESG to both corporations and investors. Using data from the source, Refinitiv, the authors discovered 452 companies, comprising 199 from developing nations and 253 from industrialized countries, from 2017 to 2021, with an annual frequency of 2,260 observations. The authors use the following models in this study: fixed-effects model (FEM), random-effects model (REM), and Gaussian mixture model GMM to estimate the variables. The research findings support our hypothesis: there is a positive relationship between ESG standards and corporate dividend payout policy. This relationship is particularly weakened in light of the COVID-19 pandemic. Along with that is a discovery between the two groups of developed and developing countries about the above correlations. Empirical evidence meets research objectives and is expected to be a reference source for managers to comprehensively evaluate and consider the business decisions of corporations in the current context.