Corporate governance, CSR committee, sectoral spending and dividends

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PurposeThe study explores the relationship between corporate governance mechanisms, corporate social responsibility (CSR) spending and dividend payout decisions among firms in an emerging market (India). Specifically, it examines whether the sectoral choice of CSR spending and the decision-making framework, such as the constitution and size of a CSR committee, influence dividend payouts.Design/methodology/approachThe study utilizes data from non-financial firms listed on the NSE 500 in India, covering the period from 2014 to 2020. The analysis focuses on CSR spending, sectoral allocations, and corporate governance variables, including the size of CSR committees. Models are employed to assess the impact of these factors on the likelihood of a firm paying dividends.FindingsThe study finds that CSR spending, particularly sector-wise investments, influences dividend payout decisions. Firms spending on environmental causes are more likely to pay dividends. The size of the CSR committee does not significantly impact dividend decisions. Additionally, corporate governance factors, such as the independence of the board, audit committee and the number of board meetings, play a crucial role in determining dividend payouts.Originality/valueThis study contributes to the existing literature by focusing on the interplay between sector-wise CSR spending, corporate governance mechanisms and dividend decisions within the context of an emerging economy like India where CSR activities are mandated by law. Findings of the study indicate that stakeholders focusing on CSR spending should not limit their analysis to just aggregate CSR spending, but should also consider sector-wise spending.